Itai Pazner exits as 888 CEO amid Middle East VIP compliance issues

888 has revealed CEO Itai Pazner will depart the FTSE 250 operator with “immediate” effect.

Updating the markets, 888 confirmed the exit of the long-standing CEO, with the group’s non-executive chairman, Lord Mendelsohn, assuming the role of executive chairman on an interim basis.

The interim executive chair role is understood to encompass all the duties of the CEO, although 888 has already begun the search for Pazner’s successor.

The news sent 888’s share price plummeting in early morning trading, down by 26% at the time of writing to 76p, meaning its market cap is £340m.

The departure is the latest in a series of high-profile exits. Chief transformation officer Naama Kushnir left last month after 15 years with the firm, while CFO Yariv Dafna will leave at the end of the year.

Pazner first joined 888 in March 2001 as a marketing manager and later advanced to a variety of senior roles over the next 16 years, including SVP head of B2C operations, SVP head of EMEA and UK markets, and head of global regional division.

In 2017, he became COO before becoming CEO of 888 in January 2019.

888’s new executive chair, Lord Mendelsohn, paid tribute to the outgoing Pazner in a statement: “On behalf of the board I would like to thank Itai for his significant contributions to the business over more than 20 years, including the last four as CEO,” he said.

“Itai has played a very important role in building a business with powerful proprietary technology and has overseen successful early stages to the William Hill integration process. We wish him well in his future endeavours,” Mendelsohn added.

Pazner’s time as CEO of 888 saw the acquisition of the remains of BetBright for £15m and Mandalay for £18m, and a period of sustained growth at the business in both the UK and Europe.

888 also expanded its operations further in the US with a deal to develop a Sports Illustrated branded sports betting app in July 2021 with SI parent company Authentic Brands Group.

Pazner also oversaw the £1.95bn acquisition of William Hill International, a deal which vastly increased the size and scope of 888’s operations, bringing with it an extensive retail portfolio, something the firm had historically avoided.

While the integration of Hills is still underway, 888 confirmed last week its plans to embark on a series of cost-saving measures arising from the acquisition, due to rising debts.

The operator has its corporate debts increase substantially due to a combination of rising interest rates and loans totalling £347m arising from the deal, factors which have seen the operator access debt capital markets.

In addition, 888’s operational environment has become “more challenging” thanks to shifts in global macro-economic conditions across key countries.

Elsewhere, 888 has confirmed the immediate suspension of VIP activities in the Middle East pending a high-level internal investigation into its compliance practices in the region.

The investigation centres on know your customer (KYC) and anti-money laundering policies used in respect of customer accounts, failings which it is understood to be confined to this region only.

The number of accounts affected has not been disclosed by 888, however EGR understands the suspension was triggered following an internal review, led by 888’s chief risk officer, Harinder Gill.

888 has revealed the suspension will impact less than 3% of 888 group revenue, up to around £50m.

It is understood that this investigation is not related to 888’s decision to institute selective redundancies at its Israel offices, which is part of a wider strategic cost-cutting initiative underway at the operator.

Speaking about the suspension, Mendelsohn said: “The board and I take the group’s compliance responsibilities incredibly seriously.

“When we were alerted to issues with some of 888’s VIP customers, the board took decisive actions. We will be uncompromising in our approach to compliance as we build a strong and sustainable business,” the 888 executive chair added.

Delivering his assessment of the 888 news, Regulus Partners’ Paul Leyland suggested it was “unlikely to be a coincidence” that Pazner’s departure and the market suspension came on the same day.

“As regulatory scrutiny increases, it is likely to become increasingly difficult to hide systemic AML failings in plain sight, in our view; indeed we are surprised that it has taken this long for a blow-up of this nature to happen,” Leyland wrote.

“The big question now is whether a senior scalp will be enough to appease inquisitive regulators, and especially whether US regulators take their historically vaunted extra territorial probity checks more seriously than hitherto when it comes to online operations.

He continued: “Pazner’s fall could have very serious repercussions for how many grey markets are treated, in our view, as well as signalling a much greater legacy risk from .com operations than is often appreciated.

“888 now has the problem of finding a CEO who wants to take on an operational turnaround, intense regulatory scrutiny, high debt, UK retail exposure, and gambling reputational risk.

“Legacy .com operators and those seduced by C-suite perks into wilful ignorance need to be ruled out: the venn diagram of able and willing is potentially dangerously narrow, in our view,” Leyland concluded.