DraftKings Failed to Disclose Illegal Operations of Subsidiary Company to Investors, Lost Them Money, Class Action Alleges

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Online fantasy sports and sport betting company DraftKings failed to tell investors about its subsidiary company’s past unlawful operations and exposed itself to dealings in black-market gaming, causing investors to lose money, a new class action lawsuit alleges.

The class action lawsuit was filed in Los Angeles and follows another class action lawsuit  filed over the same issue in New York earlier in July. The claim was filed by the Law Offices of Frank R. Cruz on behalf of people and entities that purchased DraftKings Inc. — formerly known as Diamond Eagle Acquisition Corp. — securities between December 23, 2019 and June 15, 2021.

The claim alleges that DraftKings violated the Securities and Exchange Act when it went public through a special purpose acquisition company and acquired Bulgaria-based gaming technology company SBTech Global Limited in April 2020.

On June 15, 2021, before the market opened, Hindenburg Research published a report calling DraftKings “a $21 billion SPAC betting it can hide its black-market operations.”

The report cited concerns over its merger with SBTech, saying that SBTech allegedly deals in black market gaming, money laundering, and organized crime. Hindenburg Research estimated that 50 percent of SBTech’s revenue comes from markets where gambling is banned.

According to the class action lawsuit, DraftKings made false and misleading statements and failed to disclose adverse facts about SBTech’s business, operations, and prospects.

Specifically it says that SBTech had a history of unlawful operations and DraftKings’ merger with the company exposed it to dealings in black-market gaming. The claim adds that those dealings increased DraftKings regulatory and criminal risks, as its revenues were, in part, derived from unlawful conduct.

“Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times,” the claim reads. “Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organized crime.”

When Hindenburg Research published the report DraftKings’s stock price fell $2.11 per share, or approximately 4.17 percent, to close at $48.51 per share on June 15, 2021.

The Law Offices of Frank R. Cruz is calling on DraftKings securities holders who suffered losses to join the class action lawsuit, and the office is suing for alleged violations of the Securities Exchange Act.

DraftKings isn’t the only company facing a class action lawsuit over alleged securities law violations. In May, biopharma company Provention Bio was hit with a class action lawsuit that alleged the company didn’t tell its investors about a delay in certification of a new product it has in development, which led to a “precipitous decline” in its market value and allegedly violated the Securities Exchange Act.

What do you think of the way DraftKings acquiring a company that has an alleged history of black-market dealings? Let us know in the comments section!

Read About More Class Action Lawsuits & Class Action Settlements:

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• DraftKings Class Action Lawsuit Filed Over SBNC Betting Rules
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• DraftKings, FanDuel Face Class Action Over Alleged Cheating Scandal