Australian legal firm Maurice Blackburn Lawyers said in a Monday press release it would that day file a class action against casino operator Crown Resorts Ltd in the country’s Federal Court.
The law practice stated: “The class action centres on a sharp price drop of almost 14 percent on 17 October 2016, suffered by Crown shareholders in the aftermath of 18 Crown employees having been arrested and detained in China in relation to alleged gambling crimes.”
The class action has been filed on an open-class basis, meaning shareholders can still register to recover compensation regarding Crown Resorts shares purchased between February 6, 2015 and October 16, 2016.
In a Monday filing to the Australian Securities Exchange, Crown Resorts said it would “vigorously defend the proceeding”.
Maurice Blackburn Lawyers stated the Crown Resorts arrests in China were “significant for their impact on Crown’s future revenue from VIP gaming”.
The law firm added: “They also raised questions regarding Crown’s significant investment in its Sydney venture at Barangaroo, which had been spruiked as a VIP focused casino and luxury resort.”
Andrew Watson, the legal group’s national head of class actions, said in a prepared statement contained in the press release: “Shareholders should have been apprised of the risks that Crown was taking in China and the threat they posed to the company’s revenue streams.”
In August, Crown Resorts had reported that VIP turnover had plunged 39.7 percent year-on-year in the fiscal year ended June 30, 2017, coinciding with the arrest in China of some of the group’s VIP marketing team.
In a late October filing to the Australian bourse, the casino operator’s chairman John Alexander had said that it was “encouraging” that the firm’s VIP gambling turnover from July 1 to October 22 this year was only down 17 percent on the prior-year period.
Class action lawyer Mr Watson said in the Monday statement: “Chinese authorities could not have made the risks of marketing gambling [in mainland China] any plainer to Crown or other casino operators, yet Crown ignored these warnings.”
In August 2015, China News Service, an official mainland news agency, had reported that police departments in Jiangsu, Shanghai, Hebei and Beijing had conducted “crackdowns” on some agent networks in mainland China that promote gambling trips to South Korean casinos and that make commissions based on a percentage of gambling win or percentage of the amount wagered.
The news agency also reported that the mainland’s Ministry of Public Security had started an operation called “Chain Break” – said to be aimed at disrupting foreign casinos’ access to money flows from China and those casinos’ links to individuals that scout for gamblers from China.
In June this year – following their detention in October 2016 by mainland Chinese authorities and their subsequent arrest – a number of Crown Resorts’ staff, including Jason O’Connor, executive vice president for international VIP business – pleaded guilty and were convicted by the Baoshan District Court in Shanghai of contravening China’s criminal law, and received prison sentences.
Maurice Blackburn Lawyers stated in its invitation to investors wishing to take part in the class action against Crown Resorts: “There is a compelling set of events suggesting that the company knew or should have known of the risks the Chinese environment posed to the company’s revenue streams, and therefore shareholders should have been apprised of those risks which should have been factored in to the share price.”
It stated: “Given the market reaction to the news once it became public was severe, with Crown shares falling almost 14 percent on a trading volume of over 10 million – almost 10 times the three-month average – in a single day, that information clearly was material to the share price and should have been disclosed earlier.”
This meant investors had paid “an inflated price” for Crown Resorts’ shares, said the law firm.
“It is that inflation that this potential class action will seek to recover on behalf of aggrieved shareholders,” added the practitioners.
Feb 16, 2018Due to the Chinese New Year holiday, the GGRAsia team will be off between February 16 and 19. We will be back on February 20. We wish all our readers a prosperous Year of the Dog!
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