Troubled online lottery business Lottery.com has been served a notice of de-listing by the Nasdaq stock market due to multiple violations the exchange’s rules, as resigning board member Naila Chowdry warns of a “corporate hi-jacking”.
Lottery.com has been in crisis since the summer of 2022, when its then-chief revenue officer admitted that he had “over-stated” the company’s cash balance. Since then, the business has seen multiple waves of resignations, the company unable to make pay-roll and a board in open civil war.
In September, a new investor was named in an SEC filing, Woodford Eurasia Assets, which then proceeded to take de-factor control of the business. According the Chowdry, this occurred “without US regulator notification or disclosure nor a majority vote of the company’s shareholders.”
The change of control happened because Woodford, as a requirement for the financing it had promised the company, mandated that four of the five current board members resign, with replacement directors appointed that would be suitable for Woodford.
Chowdry said that the promised multi-million-dollar financing never arrived, “much less occurred during the stated time and in the stated amount”.
“So, it can be argued that the changeover of the board to directors acceptable to Woodford, may be interpreted as a ‘corporate hi-jacking’ of a distressed US company by parties affiliated with Woodford in the UK, where Woodford never fully had to deliver on its published commitment,” Chowdry said.
“In other words, any legal ‘due consideration’ for the change of control was never paid. Additionally, the successor board never filed an 8-K subsequently stating any modification to the terms of the Woodford financing.”
Chowdry also questioned the independence of chairman Matthew McGahan, special advisor Nasib Piriyev and director Barney Battles, due to them being appointed as successors to the resigning directors by Woodford, in connection with Woodford’s demand of restructuring the board.
“I won’t be a part of it”
In February, the business saw fit to replace CEO Sohail Quraeshi with Mark Gustavson despite Lottery.com having only named Quraeshi to the position on a permanent basis in November. In her resignation letter, Chowdry shed some light on the events that led up to Quraeshi’s sudden exit from the company.
Because of Woodford’s failure to send the funds it had committed to, Quraeshi sent a loan default letter to the company, with the foreknowledge of the chairman. This “only resulted in his dismissal for the audacity to demand that Woodford honour payment of its loan commitment.”
“McGahan and special advisor Piriyev have repeatedly shown docile subservience to, and entanglement with Woodford, which is further highlighted by this action,” Chowdry said.
“In other words, instead of supporting Mr. Quraeshi as would be appropriate, the majority of the board, which is only two members, voted to terminate him.”
“Generally, what I have observed is that the behaviour of the board’s chairman and his special advisor Piriyev, have repeatedly demonstated an underlying, unstated self-interest in taking control of the company in conflict with the interests of the company’s shareholders, and potentially to the advantage of Woodford and possibly other parties undisclosed.
“I won’t be a part of it.”
Lottery.com said it did not agree with Chowdry’s characterisation of the events at the company. In response to her letter, the company said that it “strongly rejects” the allegations made by the resigning board member, “by someone who suddenly resigned and departed the company”.
“Contrary to Ms Chowdhry’s claims, the company believes that it has taken proper actions, including with respect to its engagement with existing shareholders, the appointment of executive officers and corporate fund raising, among others, that are in the best interests of all of its stockholders and the company,” said Lottery.com in an SEC filing.
The business said it is seeking legal guidance on how best to respond to the allegations, and said that it is considering taking legal action.
Lottery.com is also facing de-listing from the Nasdaq due to multiple failures to comply with the exchange’s listing requirements. In an SEC filing the company received a notice from the stock market that – as a result of Chowdry’s resignation – it would no longer be in compliance, as it did not have enough directors on the board.
Separately, the Nasdaq has also warned that the company is also not in compliance due to it stock falling below $1 per share for a lengthy period, and that it has not filed its quarterly reports.
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