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FanDuel Founders and Former Employees to Sue Over ‘Rigged’ Deal

Dominique Adams


fanduel founder

FanDuel’s board of directors, private-equity investors and its current CEO are accused of colluding to undervalue the company by billions ahead of its merger with Paddy Power Betfair.

Founders, early investors and more than 100 former employees have filed a lawsuit in the Supreme Court of New York against wealthy corporate investors, former FanDuel board of directors and the current company CEO, Matthew King, for allegedly rigging the 2018 merger with Paddy Power Betfair.

The legal papers outline how wealthy investors and the board directors engaged in self-dealing by deliberately ensuring they received shares worth billions, while common shareholders,  including the founders and employees who built the company, were left with nothing. The plaintiffs are represented by Bartlit Beck LLP.

FanDuel, which was launched by four friends attending the University of Edinburgh, moved to New York where it became a major market leader in the sports games industry. However, due to a series of expensive legal battles with US authorities over anti-gambling legislation, the founders were compelled to sell the business.

The buyers then made a deal to merge the company with betting giant Paddy Power Betfair. Under the merger terms, the preferred shareholders, such as the private equity investor defendants, were entitled to the first $559 million in proceeds from the merger. Common shareholders, like the founders and former employees, were entitled to everything above that amount.

When the deal was made the board of directors did not get an independent assessment of the company’s value and did not put it to a shareholder vote, while withholding key documents from common shareholders.

The plaintiffs accuse the defendants of purposefully undervaluing the shares and then selling the business for $465m which meant the common shareholders received nothing. The number of shares the defendants would have in FanDuel Group, therefore, hinged on the valuation of the stock in the newly merged company that FanDuel received.

An independent valuation would have valued the shares at significantly more than $559 million and cost the defendants the billions, the plaintiffs say.

“Put simply these investors and the board cheated FanDuel employees to give themselves a massive payday,” said Nigel Eccles, a founder and former CEO of FanDuel.

“They failed to ask for an independent valuation, failed to hold a shareholder vote and then hid documents from employees and other investors to cover up their misdeeds. Their self-dealing fails any basic fiduciary or moral standard.”


Mike Kuchera, an early employee of FanDuel, said: “I borrowed $5,000 from my dad to buy my shares in FanDuel because I believed in what we were building. There were times I worked 24-hour days because I knew we had a product and brand that customers loved.

“To have greedy investors abuse their position of trust with the express purpose of making my investment worthless is everything that is wrong with Wall Street today.”

The plaintiffs are now seeking $120m from the company, now known as Flutter Entertainment. The lawsuit intends to demonstrate how the defendants’ actions were a clear breach of their fiduciary duties, which cost employees and the founders hundreds of millions of dollars’ worth of shares in the new FanDuel Group. The company has more than $285 million in revenues – a 50% year-over-year growth – and continues to be a leader in a multi-billion-dollar industry.

Warrick Taylor, an early FanDuel employee, said: “Working for a startup is about buying into a vision, making sacrifices and working hard for something you believe in.

“These employees did that and built a successful company. To have investors collude to shut them out of benefiting from the upside of all their endeavours isn’t just a slap in the face, it’s a punch in the face. I believe the court will help right this terrible wrong.”

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Dominique Adams

Staff Writer, DIGIT

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