ShareImage courtesy of Inc. Magazine
Jiahan Yu, a shareholder with the popular online sportsbook DraftKings, has filed a lawsuit with the US District Court for the Southern District of New York accusing company executives of malfeasance and insider trading.
Company CEO Jason Robins and SBTech founder and DraftKings director Shalom Mackenzie are among the 22 defendants named in the lawsuit. The focal point of the lawsuit concerns alleged illegal dealings of DraftKings peripheral SBTech in Asia from December 2019 to June 2021.
SBTech became part of DraftKings in April 2020, and the lawsuit holds that DraftKings did not ensure that illegal gambling operations in Asia were discontinued when the two companies merged. Specifically, an SBTech subsidiary, BTi/CoreTech, is allegedly responsible for the illegal activities.
According to the lawsuit, “well over 90%” of BTi’s dealings were completed in black markets in Asia. The lawsuit by Yu reaffirms Hindenburg Research’s findings earlier this year.
This summer, Hindenburg Research, an investigative research and reporting company, accused DraftKings of involvement in illegal activity. According to the findings by Hindenburg, SBTech was in operation in areas where sports betting was illegal.
Hindenburg also alleged that SBTech could be linked to organized crime and money laundering. These findings were based on “an analysis of DraftKings’ SEC filings, conversions with former employees and supporting documents.”
Hindenburg Research’s findings this summer prompted the Securities and Exchange Commission to probe into DraftKings and its subsidiaries dealings.
Numerous law firms urged shareholders to sue the company for illegal activity, and it seems as if Yu has taken the advice. Other DraftKings investors also have ongoing class action lawsuits with the company.
Yu’s lawsuit also accuses six company executives, president and co-founder Matt Kalish, global technology president Paul Liberman and four members of the DraftKings board, of insider trading.
According to the suit, these executives misled the public and encouraged an artificial inflation of DraftKings stock. By selling the artificially inflated, the executives allegedly made over $800 million.
Yu’s lawsuit could have detrimental effects on DraftKings which has already had a rough year legally, and the company has suffered a “loss of reputation and goodwill.”
