In March the UFC and DraftKings announced that they had signed a ‘groundbreaking deal’ that made DraftKings the UFC’s first-ever ‘Official Sportsbook and Daily Fantasy Partner’.
This week DraftKings, which went public in 2020, has seen its stock tumble amid allegations of ties to black market gambling and organized crime.
The claims were made by Hindenburg Research, an investment firm that focuses on activist driven short-selling. ‘Shorting’ refers to borrowing shares in a company and selling them with hopes of buying them back at a lower price and then pocketing the difference as a trading gain. To profit from short-selling the company you invest in needs to decrease in value.
Since 2017 Hindenburg Research has released reports alleging fraud and malfeasance against various companies they have shorted, including Nikola Corporation, Clover Health, Ormat Technologies and Lordstown Motors.
Hindenberg Research claims that their short-selling gives them access into these companies and thus enables their investigative reporting.
Hindenberg Research’s lengthy report on DraftKings dropped on Tuesday and can be read here.
The report focuses in on DraftKings’ merger with Bulgarian gaming technology company SBTech. The report alleges that SBTech is extensively involved in black-market gaming, money laundering and organized crime.
A former DraftKings employee is quoted in the report stating that SBTech’s gaming infrastructure has been “sold to plenty of mobs”. Former SBTech employees claims that SBTech also created a ‘front’ called BTi/CoreTech to help shield SBTech and DraftKings from illicit business.
That front business is accused of having clients that include a triad kingpin and a massive illegal online betting ring in Vietnam. SBTech is also accused of knowingly operating in Iran, despite U.S. Sanctions forbidding them from doing so.
At the end of their report Hindenberg Research concluded the following:
We think DraftKings has systematically skirted the law and taken elaborate steps to obfuscate its black market operations. These violations appear to be continuing to this day, all while insiders aggressively cash out amidst the market froth.
DraftKings have responded to the allegations made by Hindenberg Research, telling CNN, “Our business combination with SBTech was completed in 2020. We conducted a thorough review of their business practices and we were comfortable with the findings.”
DraftKings told CNN it would not comment on allegations that it is involved in illegal sports betting operations in Vietnam, Thailand, Malaysia and Iran or any claims made by former SBTech employees.
“This report is written by someone who is short on DraftKings stock with an incentive to drive down the share price,” added DraftKings.
The UFC has not responded to Bloody Elbow’s request for comment on this story.