DraftKings has another legal hurdle to overcome. This is after one shareholder filed a lawsuit against several senior executives and other shareholders within the company.
Jiahan Yu is the complainant after filing the suit in the US District Court for the Southern District of New York. The main bone of contention is the process of acquiring SBTech, with Jiahan claiming the operator was involved on misdoings. Jiahan also leveled allegations of insider trading by some senior executives.
The lawsuit filed accuses DraftKings of failing to ensure SBTech, which is the company’s sports betting technology provider, stopped illegal gambling activities in Asia. This was after the three-way merger deal completed with Diamond Eagle Acquisitions Corp, a specialist company in acquisition matters.
The complaint further states the entire operation was done by BTi/CoreTech, a front company. It also used a report by Hindenburg research showing the blueprint behind DraftKings’ involvement in the underhand dealings as a result of the none separation between BTi/CoreTech and SBTech after closing the transaction in 2020.
This report further uncovered possible organized crime involvement in several countries including China, Vietnam, and Thailand touching on BTi/CoreTech’s operations. The disclosure further implicates DraftKings in misdoings from not disclosing the dealings.
It further shows wrongdoings by the operator for issuing misleading/false statements around the risk associated with financial crime originating from activities in Asia.
CEO Jason Robins, Shalom Mackenzie, a DraftKings shareholder and SBTech founder, DEAC CEO Jess Sangansky, and CFO Jason Park are among 22 defendants named in the complaint. They will now answer charges on unjust enrichment, violations in securities, corporate asset wastage, gross mismanagement, and the company’s long-term loss of its reputation.
The complaint also includes claims of insider trading associating six executives at DraftKings. These insider trading allegations are based on misleading/false statements with funds totaling over $825 million.
The executives facing these claims are John Salter, Hany Nada, and Steve Murray who are all board members. Others are Paul Liberman the global technology president and Matt Kalish who is the president and co-founder.
The complaint stated the company suffered significant damage resulting from the defendants’ reckless/knowing breaches of the fiduciary duty. It continues to state that the resulting actions of the defendants caused and continue to cause the company’s loss of goodwill and reputation.
DraftKings has a range of legal hurdles to navigate. It’s already under the keen scrutiny of Securities and Exchange Commission after the Hindenburg report became public. But the operator doesn’t seem shaken by the latest events. It’s now sizing up another acquisition worth $22 billion.
Samantha has a passion for all things casino, especially for the development in new slots games and technology. She has a background in psychology and loves to study strategies behind gambling in her spare time.
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