DraftKings Upset after Hindenburg Research Accuses It of Involvement in Illicit Activity

DraftKings is in bed with organized crime and money launderers. That’s what someone with Hindenburg Research would have everyone believe, although the individual (or individuals) may have ulterior motives. The gaming operator was called out yesterday by Hindenburg, a noted short-seller, resulting in DraftKings’ stock price registering a sizeable drop. DraftKings has responded to the report, and, if there were odds on the company launching legal action against the short-seller, they would definitely be worth taking.

Hindenburg Drops a Bomb

Yesterday, Hindenburg Research, founded by Nathan Anderson, released a report on DraftKings, alleging that its SBTech operating unit was live in certain regions where sports gambling was illegal and that it might be linked to organized crime and money laundering. It asserted that “roughly 50% of SBTech’s revenue” comes from illegal markets, especially in Asia, which it concluded based on “an analysis of DraftKings’ SEC filings, conversations with former employees, and supporting documents.”

The result was a significant drop in DraftKings’ stock price, which may have been what Hindenburg wanted all along. Monday afternoon, after already slipping across the previous week, it plummeted from $50.62 at 4 PM to $44.86 the following morning at 9:30 AM. It has since recovered some of its losses and, as of yesterday afternoon, was trading at $48.51. Hindenburg confirmed in its report that it had hedged on the stock price falling.

Hindenburg alleges that a former SBTech executive, Tom Light, left the company to launch BTi, a tech company that would later become CoreTech. That entity then supposedly became a front to allow SBTech to operate in certain Asian markets where sports gambling isn’t allowed. Leading CoreTech is Amir Vankin, the previous head of an Israeli binary option, SpotOption, that was raided by the FBI four years ago and ultimately charged by the US Securities and Exchange Commission of swindling $100 million out of investors in the US.

DraftKings Fires Back

DraftKings didn’t waste time returning the lob. It published a response that was sent to several media outlets and told FOX Business that the report was prepared solely by someone “who is short on DraftKings stock” and who had “ an incentive to drive down the share price.” It added that its merger with SBTech, which was completed a year ago, was only possible following significant due diligence that left the company “comfortable with the findings.”

Anderson has a history – sometimes accurate, sometimes not – of going after big companies and appears to be motivated by the opportunity to drag companies through the mud, especially when they’re linked to public stock trading that he may have an interest in. Short-sellers make a living betting on and profiting from dips in stock prices, and Hindenburg has already faced several lawsuits over questionable attacks. It’s possible if DraftKings wants to turn this into a major ordeal, that this latest attack might bring the same conclusion. For now, though, DraftKings would only add, “We do not comment on speculation or allegations made by former SBTech employees.”