US Lottery Operator Facing Class Action Lawsuit
Publicly-traded operator Lottery.com is in a legal battle, with three of its executives facing a class action lawsuit over non-compliance with state laws. In addition, investor Preston Million has filed a suit claiming the company made “materially false or misleading” financial statements.
Former Lottery.com Executives Named in Lawsuit © Pixabay.
Lottery results provider and operator, Lottery.com and three members of its senior team have been named in a shareholder class action lawsuit over financial irregularities and potential breaking of state and federal laws.
In the suit filed at the US District Court for the Southern District of New York, investor Preston Million claimed the company executives had made “materially false or misleading” statements. It relates to a timeframe between 15 November 2021 and 29 July 202 when the company employed public accounting firm Armanino LLP as its auditor.
The allegations against Lottery.com is that the company lacked adequate accounting safeguards and processes that were not in place in revenue recognition and cash reporting areas. The suit also claims that the company were not in compliance with state and federal laws that attain lottery ticket sales, meaning public statements made by the operator were false and misleading “at all relevant times”.
Last month Lottery.com admitted that an investigation that it had launched internally had discovered breaches of state and federal laws in the states in which the company had made lottery purchases. Also identified was “non-compliance” with rules that govern order fulfilment.
As a result of these findings, the company terminated the employment contract of the company president, treasurer and CFO, Ryan Dickinson. This action caused a 12% fall in the company’s share price on 15 July, forcing Lottery.com chief revenue officer Matthew Clemenson to resign shortly afterwards.
Lottery.com would later admit that the investigation had revealed that the company “overstated” by $30m its available cash balance. As a result, the reported revenue figures should have been $30m lower.
This revelation caused the company’s share price to plunge a further 14.5% on 16 July, and six days later, CEO Lawrence DiMatteo resigned from his position.
A week after DiMatteo’s resignation, the company said it didn’t have “sufficient financial resources” to pay staff or to pay some existing obligations. As a result, the share price collapsed, losing 64% of its value in one day.
Those named in the legal documents are CEO Lawrence Anthony “Tony” DiMatteo III, CFO Ryan Dickinson and Matthew Clemenson, the company’s former chief revenue officer. All three have since left the company. The lawsuit states, “The individual defendants possessed the power and authority to control the contents of Lottery.com’s SEC filings, press releases, and other market communications,”
“The individual defendants were provided with copies of Lottery.com’s SEC filings and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or to cause them to be corrected.
“Because of their positions with Lottery.com, and their access to material information available to them but not to the public, the individual defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations being made were then materially false and misleading,” “As a result of defendant’s wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,”
Lottery.com was delisted from the National Association of Securities Dealers Automated Quotations Stock Market (Nasdaq) yesterday (Tuesday) after stating they would not be able to produce financial statements that a mandatory to be listed on the exchange. The company is now subject to a 60-day period in which they can submit a recovery plan to restore Lottery.com’s listing.
