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Lottery.com hit by class action lawsuit

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The end is likely near for Lottery.com, the lottery ticket management service that lets people play the lottery and keep track of their entries from their phone. On Monday, law firm Portnoy announced that it had filed a class action lawsuit against the company on behalf of shareholders.

The complaint alleges a number of transgressions. We’ll let the law firm speak for itself (emphasis added):

“According to the complaint, the company made false and misleading statements to the market. Lottery.com failed to maintain appropriate accounting controls. The Company also failed to maintain appropriate controls over financial reporting, including revenue recognition and cash reporting. The Company was not in compliance with the laws relating to the sale of lottery tickets. Based on these facts, the Company’s public statements were false and materially misleading throughout the Class Period. When the market learned the truth about Lottery.com, investors suffered damage.

These allegedly poor accounting controls and controls over financial reporting surfaced mid last month when Lottery.com admitted to overstating its cash balance by $30 million. He also recognized revenues of this exact same amount the previous year when he should not have.

The real height of the company’s problems came in late July, when it announced it was $425,000 short of its wage obligations. And since he didn’t expect to be able to scrounge up any money, he was probably going to downsize.

Lottery.com anticipated a possible chain reaction in which it would have to lay off developers and engineers, disrupting the deployment and maintenance of its product, causing it to lose customers and force it to break its contracts.

The natural end game would be for the company to shut down completely.

News of the payroll shortfall destroyed shares of the company (LTRY), which were already in freefall. On July 28, Lottery.com shares closed at $0.8150. The next day, they closed at $0.2950, ​​a loss of 63.8%.

But, as mentioned, this was really just a dramatic percentage drop after what was already a year-long devastation to the company’s market value. On November 5, shares of LTRY closed at $15.70; in less than nine months, the company lost almost all of its value. The stock price has risen slightly since July, closing at $0.4011 on Tuesday.

In May, Lottery.com touted its supposedly fantastic first quarter financials. Co-Founder and CEO Anthony DiMatteo said, “We believe the combination of our multi-pronged growth strategy, focus on profitability and a strong balance sheet positions us all for future success.

It doesn’t look like that future is happening. DiMatteo resigned from his post last month.