888 Holdings Plc plunged the most in more than 16 years after Chief Executive Officer Itai Pazner stepped down amid a probe into whether some of the British gambling group's VIP accounts violated money laundering policies.

Shares dropped 26% to 76.45 pence at 12:02 p.m. in London, their biggest intraday decline since 2006, and taking them to their lowest level since March 2020. 888's junk-rated bonds fell the most on record across their various tranches on Monday, between 5 and 6 cents on the euro, according to CBBT pricing compiled by Bloomberg.

The company suspended VIP customer accounts in the region after it found that "know your client" best practices for its highest-value gamblers weren't followed, it said in a statement on Monday. 888 said it believes the "process deficiencies" are isolated to its Middle East market and that the suspension of VIP activities will reduce revenue by less than 3%.

The probe is the latest obstacle for the British gambling company, which has seen its market value plummet from a peak of £1.78 billion ($2.2 billion) in 2021 to about £333 million. The company borrowed heavily to buy assets from gaming peer William Hill International at an enterprise value of £2.2 billion, and analysts have since warned that the interest expense would hurt profit.

Chairman Jonathan Mendelsohn will assume the role of executive chair on an interim basis while the board searches for a permanent CEO. Pazner, who had been at 888 for more than 20 years and CEO for four, didn't respond to requests for comment. A representative for 888 declined to comment beyond the announcements.

The development could hit full-year earnings by as much as £40 million ($49.6 million) if the region's VIP customers don't return, Goodbody analyst David Brohan said in a note to clients. It also raises the issue of liabilities related to historical revenue from these customers, and the company could face further issues if it has found that these sales were illegitimate. 888's revenue is expected to hit £1.8 billion in fiscal 2023, according to the average analyst estimate compiled by Bloomberg.

VIP customers are a small set of gamblers who typically spend a disproportionate amount and can receive special attention from operators.

The update, while confined to the Middle East operations, raises questions about 888's controls and compliance as its U.K. home market prepares to overhaul its gambling laws to potentially tighten laws around player safety, staking and advertising.

The company received a £9.4 million fine from the British gambling regulator last year over social responsibility and money laundering failures, its second after a 2017 penalty. The watchdog only licenses operators to provide gambling services to British consumers.

"If there is a repeat of the failures at 888 then we have to seriously consider the suitability of the operator to uphold the licensing objectives and keep gambling safe and crime-free," Gambling Commission CEO Andrew Rhodes said last March.

Thomas Seal and Sarah Jacob report for Bloomberg News.

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