A new lawsuit that focuses on alleged insider trading and illegal dealings by SBTech has named DraftKings executives. [Image: Shutterstock.com]
Named 22 defendants
A multi-million dollar lawsuit that names numerous DraftKings senior executives and shareholders alleges that DraftKings subsidiary SBTech engaged in illegal gambling activity and DraftKings executives engaged in potential insider trading.
filing names 22 defendants, including DraftKings CEO Jason Robins
Shareholder Jiahan Yu was the one who filed in US District Court for the Southern District of New York this shareholder derivative action. In total, the filing names 22 defendants, including DraftKings CEO Jason Robins, group CEO Jason Park, as well as SBTech founder, DraftKings director, and major shareholder Shalom Mackenzie.
The filing relates to dealings within DraftKings from December 2019 until June 2021. The main focus of the lawsuit is on SBTech, which became a part of DraftKings following a reverse merger in April 2020 with the Diamond Eagle Acquisition Corporation special purpose acquisition company (SPAC).
SBTech’s operations in Asia
One of the main allegations is that DraftKings did not make sure that SBTech discontinued illegal gambling operations in the Asian market after the merger’s completion. New York investment firm Hindenburg Research had made similar allegations in June, which DraftKings denied.
BTi/CoreTech, an SBTech subsidiary, was allegedly responsible for these illegal operations. The lawsuit also alleges that DraftKings is at fault for not disclosing the operations, as well as making misleading or false statements regarding the elevated risks of financial crime associated with them.
The lawsuit outlines a number of offenses, such as Securities and Exchange (SEC) law violations. There are also alleged acts of abuse of control, wasting and gross mismanagement of corporate assets, and unjust enrichment.
lack of separation between SBTech and BTi/CoreTech implicates the company in unlawful activity”
The lawsuit alleged that “well over 90%” of BTi/CoreTech’s business was from grey or black markets. It stated: “The lack of separation between SBTech and BTi/CoreTech implicates the company in unlawful activity.”
The Hindenburg investigation had outlined the links between BTi technology and numerous illegal black market operations in countries like China, Vietnam, and Thailand.
Allegations of insider trading
In addition to these malfeasance claims, the lawsuit also alleges that six DraftKings executives engaged in lucrative insider transactions relating to misleading or false statements. They also received financial incentives or bonuses that were based on what was an alleged artificially high share price.
The six executives in question include DraftKings co-founder and president Matt Kalish, global technology president Paul Liberman, and four people on the DraftKings board. The lawsuit referenced transactions carried out across numerous time periods that had total proceeds worth over $825m.
As a result of these alleged offenses, the lawsuit claims that DraftKings has been substantially damaged and will continue to suffer “a loss of reputation and goodwill” as well as a “liar’s discount” that could affect the company’s share price into the future. This lawsuit is seeking a jury trial for the 22 people named in the filing.
DraftKings is already the subject of an SEC investigation related to the findings from the Hindenburg Research report. At the time of the report’s release in June, DraftKings’ share price dropped significantly. There are also ongoing class action lawsuits from other DraftKings shareholders.
(this story/news/article has not been edited by PostX News staff and is published from a syndicated feed)