The Australian casino operator Crown Resorts faced another hurdle, after being hit with a class action lawsuit from shareholders on Monday. Allegedly, the company had failed to inform its shareholders of its China marketing campaign that led to staff arrests in October 2016. The lawsuit was filed on behalf of Crown’s shareholders who invested in the company in the period from February 6th, 2015 to October 16th, 2016.
The federal court action was filed by the law firm Maurice Blackburn on behalf of some shareholders who claimed that the casino company did not take timely and accurate measures to handle activities which resulted in the arrests of 18 employees in China in 2016.
Shareholders are sill given the chance to register online as part of the class action against Crown Resorts and seek compensation for their losses in the afore-mentioned period between February 2015 and October 2016.
Crown Resorts revealed that it intends to defend itself against the allegations in the lawsuit.
Staff Arrests in China Hit Crown Resorts’ Performance
The casino operator saw its share price suffer a massive decline of almost 14% to AU$11.15 after a number of company’s employees had been arrested in China, under the allegations in arranging marketing gambling trips to Macau. As a result, over AU$1.3 billion of Crown Resorts’ market value was lost. Currently, gambling is permitted in Macau, an autonomous region on the south coast of the country, but it is banned as illegal in China mainland.
Due to the staff’s arrests, the Australian gambling operator was forced to alter its plans for off-shore expansion as part of the “global strategy” of James Packer. As a result, Crown Resorts, which is currently the largest casino operator in Australia, had exited Macau and Las Vegas to focus primarily on its domestic operations.
Apart from wiping off more than a billion of the company’s market value, the arrest of Crown’s employees also raised some questions in terms of the massive investment made by the operator in its venture in Barangaroo, Sydney, which has been publicly advertised as a luxury casino and resort focused on VIP customers.
Andrew Watson, who is the head of class action for Maurice Blackburn for the domestic market, commented that the company’s investors should have been informed of the risks taken by the casino operator in China as well as of the possible dangers related to those risks. He further added that the Chinese authorities could not allow marketing gambling of Crown Resort or any other casino operator, but the Australian company seemed to have not paid enough attention at these warnings.
Mr. Watson also described the legal obligations of gambling operators as something that keeps the integrity of the entire market intact, and shared that these obligations guarantee that investors could make informed decisions whether to put some money in a certain casino operator, or not.
- Author
Olivia Cole
