Codere Online faces potential class action over securities fraud allegations
Litigation firm Pomerantz LLP to begin investigation on behalf of shareholders after operator’s accountancy firm quits over IT “deficiencies”
Pomerantz LLP has launched an investigation into Codere Online on behalf of the operator’s shareholders after its officers and/or directors were alleged to have engaged in securities fraud or other unlawful business practices.
The class action has arisen after Codere Online’s former independent registered public accounting firm Marcum resigned, effective from 20 December 2024.
The news was confirmed in a Codere Online SEC filing on 27 December, with Pomerantz claiming the news sent the Nasdaq-listed firm’s share price slipping by almost 4% to $6.77.
At the time of writing, the operator’s stock sits at $6.38, down more than 20% in the past month.
Marcum said its decision to resign was made due to its inability to complete certain audit procedures due to “IT general control deficiencies” concerning Codere Online’s third-party partners.
As per the SEC filing, Codere Online said Marcum claimed there were “insufficient internal controls in place at [Codere Online] to overcome said deficiencies”.
Codere Online said that during the last two fiscal years and up to and including 20 December, there were no disagreements between the two firms.
However, the operator added it did report “material weaknesses in internal control over financial reporting in 2022 and 2021”.
Codere Online said: “[This was] primarily related to the lack of sufficient technical accounting and supervisory personnel who have the appropriate level of technical accounting experience and training, the lack of implementation of internal controls over internal and outsourced business processes and supporting systems and the lack of controls over cybersecurity processes outsourced to Codere Group.”
On 31 December 2024, Codere Online announced it had engaged MaloneBailey as its independent registered public accounting firm for the fiscal years ending 31 December 2023 and 31 December 2024 to replace Marcum.
Codere Online has recently submitted an appeal after it received a delisting notice from Nasdaq’s listing qualifications department over a failure to submit Form 20-F, an annual report filing required by non-US and non-Canadian companies that have securities trading in the US.
Codere Online added: “The company looks forward to working with MaloneBailey and is committed to filing its Form 20-F for the year ended 31 December 2023 as soon as possible in order to regain compliance with applicable Nasdaq continued listing requirements.”
EGR contacted Codere Online for comment.