Entain claims BetCity failed to disclose AML investigations into business ahead of sale
FTSE 100 operator’s legal challenge in UK comes to light as firm seeks damages and costs against former owners of Dutch operator
Entain’s legal challenge against the former owners of BetCity relates to the latter’s failure to disclose regulatory investigations into the Dutch operator ahead of the sale of the business, it has been revealed.
Entain’s Dutch subsidiary filed a claim in the UK Commercial Court on 7 December 2023 against seven members of the Singels family, former CEO Melvin Bostelaar and ex-marketing director Robert Kooiman.
The claim, which was initially filed under a complaint relating to “general commercial contracts and arrangements”, has now been revealed, and states that BetCity management failed to disclose ongoing Netherlands Gambling Authority (KSA) reviews into the business.
A copy of the court document, first procured by Dutch website Casino Nieuws, makes the case that while Entain and BetCity were closing in on an agreement for the sale, two investigations were being carried out by the KSA into the BetCity – neither of which the defendants disclosed prior to the completion of the transaction.
The pair agreed to the sale of BetCity to Entain in June 2022, which could see the FTSE 100 firm pay up to €850m following an initial €300m upfront payment in January 2023.
However, in November 2022, Entain was made aware of the investigations and the following month notified the BetCity defendants of its claim for breach of warranty.
The first KSA investigation, which the regulator informed BetCity of on 22 April 2022, related to failings around sending marketing materials to customers under the age of 24.
On 4 May 2022, little more than a month before Entain and BetCity agreed to the purchase agreement, the Dutch firm provided the requested documents to the KSA as part of the investigation.
A second KSA investigation relating to anti-money laundering (AML) failings were started with a letter from the regulator to BetCity on 3 May 2022 and, through to September of that year, the operator continued to engage with the KSA on the matter.
On 10 November 2022, the KSA publicly announced two unnamed operators had breached AML regulations, one of which was BetCity.
On 14 November, Entain emailed former marketing director Kooiman to ask if BetCity was one of the unnamed firms. He replied one day later, confirming that was the case.
Then, on 29 November, BetCity proceeded to inform Entain of the ongoing marketing investigation which had started back in April.
Following the confirmation from BetCity to Entain regarding the KSA investigations, the Ladbrokes parent company requested, by letter on 10 December, that the defendants should bear the brunt of any fines or penalties imposed by the KSA as a result of the investigations, as well as cover legal costs.
The letter also moved to bring the completion date for the transaction forward to January 2023.
These proposals were agreed to, and an amended version of the purchase agreement was drawn up between the two firms, which was approved on 22 December 2022.
Then, a further follow-up investigation into further AML failures was launched in January 2023, with the KSA’s request for information having been sent by BetCity just one day after the new purchase deal was agreed.
In April 2023, the KSA fined BetCity €400,000 in relation the first marketing investigation, which the operator subsequently objected to, and then saw this objection dismissed.
In November 2023, the KSA reached the conclusion of its second investigation into anti-money laundering failures at BetCity and fined the operator €3m.
Entain proceeded to inform the defendants on 8 December 2023, by letter, that the operator would be filing a claim for breaches of various warranties.
Entain’s claims for loss and damages are extensive, with the firm arguing that BetCity continued to “fail to comply with the requirements of the KSA licence […] in the seven-month period between execution and completion of the [purchase agreement]”.
The operator said it had incurred losses due to the “significantly increased regulatory risk which resulted from ongoing breaches” and “losses caused by the costs of rectifying breaches during the pre-completion period”.
Entain also argued that as an outcome of the breaches, BetCity’s shares were worth less at the point of completion than they would have been originally.
The operator’s rate of claim for damages, interest and costs is yet to be specified.
The case continues.
EGR has contacted the defendants’ lawyer, Sidley Austin, for comment.