500.com Draws Shareholder Class Action Suits
Shares of 500.com Ltd. (NYSE:WBAI) have faltered in the wake of a Japanese corruption scandal, making the Chinese online gaming company the target of several class action lawsuits. The Japan bribery scandal involving 500.com has shareholders looking for answers and compensation. Japanese authorities believe 500.com, which provides online lottery contests, as well as web-based slots and table games, steered cash and travel gifts to Tsukasa Akimoto, a member of Japan’s House of Representatives, in hopes of winning an integrated resort license in Hokkaido.
On Christmas Day, Akimoto was arrested by the Tokyo Public Prosecutor’s office. He was charged with accepting $34,000 in airfare, cash and hotel rooms from an unidentified Chinese gaming firm that was later discovered to be 500.com. The disgraced politician was hauled into custody again earlier this week amid allegations that he submitted phony documentation for speaking and travel fees related to a 2017 trip to 500.com’s headquarters.
Since Dec. 26, the first US trading day after Akimoto’s arrest, through today, the New York-listed shares of 500.com have tumbled more than 14 percent, while the MSCI China Index is higher by 3.37 percent over the same period.
500.com announced on Thursday that it has hired a law firm to conduct an internal investigation in the wake of the Japan graft scandal. Several other suits filed against 500.com yesterday use the same time frame while asserting that the company’s Japan kickback scheme implies “statements about its business, operations, and prospects were materially false and misleading, and/or lacked a reasonable basis at all relevant times,” according to Glancy Prongay & Murray LLP.
Typically, victors in shareholder lawsuits are massive market players – not the proverbial “little guy.” For example, the New York State Common Retirement Fund and other institutional investors were able to wring $41 million out of Wynn Resorts last month related to that stock’s decline in the wake of the 2018 sexual misconduct allegations against former CEO Steve Wynn.
Forecasting victory for investors pursuing litigation against 500.com is murky because a judge and jury will see that the gaming company’s stock was sliding well in advance of the Japan issues coming to light. Over the past year, the shares are lower by 37 percent, while the MSCI China Index is higher by almost 20 percent. In fact, the stock has been in a multi-year tailspin. In mid-2018, 500.com traded over $20. At this writing, it resides just under $8. That decline is surely to be an issue for plaintiffs pursuing compensation from the gaming company.
