DraftKings investigated into SBTech allegations


DraftKings is being investigated into allegations raised in a report by short sellers accusing SBTech of conducting business in illegal black market gambling. [Image: Shutterstock.com]

SEC investigates Hindenburg’s allegations

US sports betting operator DraftKings is under investigation by the US Securities and Exchange Commission (SEC). The federal body has filed two class actions against DraftKings over allegations raised by short sellers Hindenburg Research regarding the company’s merger with SBTech in 2020.

SEC issued subpoena in July

DraftKings revealed the news during its earnings report on Friday. The company confirmed that the SEC issued a subpoena in July, shortly after Hindenburg released a report on the company. The organization alleged that DraftKings had committed violations of the Securities Exchange Act. It requested several documents from the operator to complete its investigations.

The Hindenburg report, which prompted the SEC investigation, claims that SBTech is involved in “black market gambling, money laundering and organized crime.” He alleges that the company, which merged with DraftKings in 2020, made around 50% of its revenue in markets where gambling is illegal.

DraftKings has confirmed its intention to cooperate with the investigation. However, the company has also claimed its innocence, saying it will “vigorously defend itself” against the allegations.

A closer look at the allegations

In his report titled “DraftKings: A $ 21 Billion SPAC Betting It Can Hide Its Black Market Operations,” Hindenburg suggested that investors were unaware of SBTech’s black market transactions. He described these illegal operations as “long and continuous,” which also implies that SBTech has gone to great lengths to cover up the problems.

Hindenburg claims that SBTech created a “distribution entity” called BTi / CoreTech to serve as a “front” to protect the public company from scrutiny. The report claims to have identified many BTi / CoreTech black market clients through research on social media and core web infrastructure.

The report lists a series of illegal gambling operations that have alleged ties to BTi / CoreTech. This includes 22 Vietnamese people arrested for operating an “illegal and massive online sports betting network” in 2019, and an unnamed Asian-focused gambling site linked to a “hub of the triad.”

DraftKings categorically denied the allegations in June. The firm said Business fox that he had “conducted a thorough review of SBTech’s business practices” and remained “comfortable with the findings”. Additionally, the company told investors this week that it did not anticipate a “significant negative effect” on its finances as a result of the ongoing SEC investigation.

Investors invited to file a complaint

In addition to DraftKings’ list of woes, five law firms have expressed interest in filing a class action lawsuit against the company if they can rally its investors. In June, law firm Portnoy, Johnson Fistel LLP, law firm Schall, Pomerantz LLP and attorney Howard G. Smith announced that they had opened investigations into DraftKings.

provided false public statements

The companies say DraftKings misled investors about important information related to SBTech in the preparation for its merger. They suggest that the latter derived its income from “illegal” and therefore “unsustainable” activities. As a result, the legal companies claim that DraftKings provided false public statements.

Potential claimants in the case have until August 31, 2021 to file a motion in the class action lawsuit. The companies appealed to anyone who purchased DraftKings securities between December 23, 2019 and June 15, 2021.

Positive results in T2

DraftKings also delivered some good news in its earnings report on Friday. The operator saw its second-quarter revenue nearly triple year-over-year to a total of $ 298 million. This represents an increase of approximately 297% from pro forma 2020 levels.

The number of DraftKings users also increased in the second quarter. Monthly unique players increased 281% from 2020, to an average of 1.1 million paying customers each month. The average monthly income per single player also increased by 26%, to a total of $ 80.

DraftKings Co-Founder, CEO and Chairman of the Board Jason Robins commented on the successful quarter. He said: “DraftKings had a particularly strong second quarter 2021, maintaining our impressive financial performance while advancing into new areas, such as media and NFTs. “

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