Public details and claims of fraud, conspiracy, and bribery by two private equity groups emerged in a second amended complaint filed on Wednesday in New York.
FanDuel’s founders and early investors are not sitting quietly in their pursuit of gaining alleged lost equity in a betting brand worth billions.
Public details and claims of fraud, conspiracy, and bribery by two private equity groups emerged in a second amended complaint filed on Wednesday in New York.
The plaintiffs, led by co-founder Nigel Eccles, won a ruling by the New York Appeals Court in May allowing them to proceed with the lawsuit under Scots law.
The complaint outlines claims that when 61% of FanDuel was acquired in 2018 by Paddy Power Betfair, which would later rebrand as Flutter Entertainment, a purposeful misevaluation of the online sports betting operator was made. This left Eccels, his wife and co-founder Leslie, and around 100 investors with lost equity.
The case began in Scotland, where Flutter was founded, and has worked its way to New York, home of FanDuel’s headquarters.
‘Phony evaluation’
The complaint alleges that private equity investors KKR and Shamrock conspired to reap massive returns.
Eccles left the company before the acquisition. After the merger, FanDuel shareholders received 40% equity in Flutter’s U.S. arm. KKR and Shamrock controlled the company’s board and those shares. Eccles claimed in a social media post that they set up a “phony valuation of $559M to wipe out common shareholders.”
4 years ago, I led a group of 100+ former employees and founders of @fanduel in a case of breach of fiduciary duty against FanDuel’s former board members (including investors KKR and Shamrock). Three months ago, the NY Court of Appeals found in our favor. The Court concluded that…
— Nigel Eccles (@nigeleccles) August 14, 2024
The plaintiffs claim that the merger was structured as a stock transaction instead of a cash deal, keeping the initial investors out.
“Consequently, the true value of what FanDuel’s shareholders received in the merger lay in the ongoing investment it represented — an investment in a company that was perfectly situated to capture share in a nascent market conservatively estimated by FanDuel itself to be worth billions,” the plaintiffs wrote in the complaint.
The damages
Shamrock and KKR sold their 40% stake for $4.2 billion two years later, Eccles claims. That was after FanDuel emerged as a leader in the lucrative U.S. legal sports meeting market.
“Standing up against the likes of KKR is not easy, but I’m determined that the team of 100+ amazing people who spent years building FanDuel from the ground up will get back what was stolen from them in 2018,” Eccles said.
Through a jury trial, the plaintiffs are hoping to receive compensatory damages of more than $500,000, unspecified punitive damages, and “ill-gotten gains” that cost early investors equity.
Sky-high rise
FanDuel has exploded since PASPA was overturned in 2018.
Flutter’s U.S. arm has been valued at more than $20 billion, and the online sportsbook recently reported $1.53 billion in revenue during the second quarter of 2024.
FanDuel led the U.S. market with a 51% net gaming revenue share in Q2. The gaming operator also owns 25% of the iGaming market in the U.S.
