I have repeatedly written over the last two years as to why investors should be wary of Ozforex Group Ltd (ASX: OFX), or the group now rebranded as OFX.

So when the price crashed around 40% in a single day in February after giant US money transfer business Western Union pulled out of a deal to buy OFX after some extensive due diligence it came as no surprise.

Western Union initially made a non-binding offer for OFX in November 2015 valuing it at between $3.50 and $3.70 per share, yet after a more than two-month due diligence period it failed to make an offer for a business it was apparently attracted to and could easily afford.

As a result of Western Union’s thumbs down, OFX’s shares are now trading around $1.90 as investors wonder what may have caused Western Union to make no offer at all.

Some think Western Union’s decision may be related to the fact that OFX revealed downgraded underlying EBITDA guidance for FY16 on the same day that it revealed that Western Union had pulled out of any deal.

In early February OFX revealed a small downgrade blamed on lower client acquisition levels due to lower advertising expenditure associated with the OzForex brand for the quarter ending December 2015. Advertising expenditure was lower for the quarter apparently as it was preparing to transition to the OFX brand over the period.

OFX also had problems in the past after Westpac Banking Corp (ASX: WBC) announced it would no longer act as a counterparty for OFX, although the fee streams it offers mean OFX is never likely to be short of a banking counterparty. Moreover, the risk of not having a banking counterparty is remote and unlikely to have put a true global money transfer giant like Western Union off.

What really may have put Western Union off is a deeper understanding of the OFX business model.

Banks and large money transfer businesses will retain all of the profit on an FX spread themselves, with no incentives for staff to charge wider spreads.

However, some money transfer businesses like OFX pay their staff (according to OFX’s own Financial Services Guide): “A flat commission of 3% of the Profit (excluding any fees charged) derived by us on each transaction”.

In other words the bigger the profit on a trade (or the wider the spread /worse the rate for a client) the more commission the employee earns.

This kind of commission structure on general advice on FX has been in the eyes of the regulator before via proposed reforms to the Future of Financial Advice (FOFA) legislation for example, and in my opinion it’s likely Western Union has concluded the success of OFX’s business model is too leveraged to its commission structures offered to staff.

Indeed, OFX has grown profits amazingly quickly thanks to its business model, although some of its insider owners chose to dump large amounts of their equity interest in the business when it floated in late 2013 and Western Union also apparently decided ownership was not for it either.

Investors then should make sure they are fully cognisant of all the risks around this business before buying shares.

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Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.