Lawsuit alleges securities fraud by DraftKings
Pennsylvania law firm seeking plaintiffs for class action.
The law firm of Kessler Topaz Meltzer & Check, LLP on Thursday noted a securities fraud class action lawsuit has been filed in the United States District Court for the Southern District of New York against DraftKings, Inc., f/k/a Diamond Eagle Acquisition Corp., on behalf of those who purchased or acquired DraftKings securities between December 23, 2019, and June 15, 2021, inclusive (the “Class Period”).
The Kessler Topaz firm, located in Radnor, Pennsylvania, represents investors, consumers and whistleblowers in class action suits in state and federal courts throughout the country involving securities fraud, breaches of fiduciary duties, and other violations of state and federal law.
The law firm did not file the complaint against DraftKings, but is seeking investors who purchased or acquired DraftKings securities during the Class Period to act as plaintiffs in a class action.
According to a statement released Thursday by the Kessler Topaz firm, DraftKings operates as a digital sports entertainment and gaming company in the US, with both business-to-consumer and business-to-business segments. DraftKings provides users with daily sports, sports betting and online gaming opportunities.
The law firm noted DraftKings also is involved in the design, development and licensing of sports betting and casino gaming platform software for online and retail sportsbook, and casino gaming products. The firm said DraftKings distributes its product offerings through various channels, including traditional websites, direct app downloads and direct-to-consumer digital platforms.
DraftKings was incorporated in Nevada as DEAC NV Merger Corp., a wholly owned subsidiary of its legal predecessor, DEAC, a special purpose acquisition company. On April 23, 2020, the law firm said DEAC consummated transactions contemplated by a Business Combination Agreement dated December 22, 2019, as amended on April 7, 2020. DEAC merged with and into DraftKings, whereby DraftKings survived the merger and became the successor issuer to DEAC.
In addition, the law firm continued, DraftKings acquired all of the issued and outstanding share capital of SBTech (Global) Limited (SBTech). SBTech is a full-service, B2B turnkey technology provider with omni-channel sports betting solutions, trading services, and marketing and bonus tools powering popular sports betting and online gaming brands.
According to the law firm, the Class Period commenced on December 23, 2019, when DraftKings issued a press release announcing the business combination with DEAC. Throughout the Class Period, the law firm said defendants “touted the acquisition of SBTech and its business.”
On June 15, 2021, the law firm said Hindenburg Research published a report alleging DraftKings’ merger with SBTech exposed DraftKings to dealings in black-market gaming. Hindenburg cited: “conversations with multiple former employees, a review of SEC and international filings, and inspection of back-end infrastructure at illicit international gaming websites,” alleging, “SBTech has a long and ongoing record of operating in black markets.” The Hindenburg report estimated “50% of SBTech’s revenue is from markets where gambling is banned.”
The complaint alleges throughout the Class Period, the defendants made false and/or misleading statements and/or failed to disclose that: (1) SBTech had a history of unlawful operations; (2) accordingly, DraftKings’ merger with SBTech exposed it to dealings in black-market gaming; (3) the foregoing increased DraftKings’ regulatory and criminal risks with respect to these transactions; (4) as a result of all the foregoing, DraftKings’ revenues were, in part, derived from unlawful conduct and thus unsustainable; (5) accordingly, the benefits of the Business Combination were overstated; and (6) as a result, DraftKings’ public statements were materially false and misleading at all relevant times.
DraftKings did not immediately respond to a request by Gaming America for a comment on the allegations.
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