The share price of Sweden's leading live casino games provider, Evolution AB, continued to fall on Thursday after allegations that the company provided games in unregulated markets and players in sanctioned locations were disputed earlier this month US government.
Bloomberg originally reported these allegations on November 16, and Evolution has steadfastly denied any wrongdoing.
The allegations came to light on November 12, when Senior Associate Ralph Marra of the law firm Calcagni & Kanefsky LLP filed a complaint with the New Jersey Gambling Enforcement Division (NJDGE) on behalf of an anonymous client who allegedly is an American competitor of Evolution.
While Bloomberg notes that they have seen recordings of some of the alleged violations, Evolution has provided a plausible explanation for why such recordings could exist.
Complex technical manipulation
In a statement released on Wednesday, an Evolution spokesperson said the incidents could only have occurred as a result of "sophisticated technical manipulations". The statement goes on to say that "active manipulation" of Evolution's systems was used to create the "impression" that playing from countries such as Iran or other countries under sanctions was possible.
The statement explains the use of multiple VPNs (virtual private networks) to connect systems, and then shutting down one of them to make it look like a player from a country under sanctions or other bans connected directly to the Evolution servers. Ukrainian casinos.
Namely: "This use of Evolution content through an operator that was not an Evolution customer but was connected to an aggregator of which Evolution is a customer was apparently done by creating a VPN tunnel from an IP address in a blocked country to get an IP address in the adopted country. From this IP address, an operator connection was made to the Evolution lobby, clearing all geographic IP checks, and a browser session was established. After that, the VPN from the received IP address was terminated, and the content session remained active in the browser.The first IP address from the blocked country remains active".
The statement goes on to say that several attempts were made to connect from the blocked country before successful manipulation, but they were rejected.
Evolution didn't waste time, stating, "This is a deliberate move designed to bypass the widely accepted and well-established process of verifying the geographic location of users in order to discredit Evolution".
In another section of the statement, Evolution explained that it is ultimately not responsible for who gets access to their games, but the responsibility lies with the individual casino operator in accordance with the rules of the gambling regulator.
Comparing the origins of online gaming to land-based gambling, they note that the slot machine provider is not responsible for who the casino management lets into the establishment or gaming hall, or who plays a particular slot machine. The slot machine provider is not required to know who the client is or anything about him, as he does not manage the money of the players.
"The same principle applies to the online casino market. It is the operator's strict responsibility to control who plays the game," the statement said.
More than $11 billion wiped from the balance
As of Thursday morning, November 25, about eleven billion euros had been wiped off the company's balance sheet, in what appears to be a direct investor response to the allegations. On Thursday, Bloomberg reported that the company's shares fell 31% in a week, losing 96 billion crowns, which is only 224 billion crowns - approximately $25,000,000.
Prior to the crash, Evolution stock was "hot", posting a 73% gain in value this year, before a sell-off that saw its market value lose 19%, the biggest drop since Evolution's IPO in 2015 year.
Earlier this year, short-selling firm Hindenburg Research claimed that SBTech, a subsidiary of DraftKings Inc, was operating in illegal markets. DraftKings claims that prior to the merger with the sports betting company, they carried out due diligence and in-depth analysis of the acquisition's business practices. The US Securities and Exchange Commission is investigating these allegations, and DraftKings was subpoenaed in July based on the report.
While it is too early to believe this is the case, it is not uncommon for a certain type of investor to attempt to manipulate stock prices in order to gain a financial advantage. Investopedia describes this