Lottery.com (LTRY) Had Ineffective Internal Controls Over Financial Reporting
A shareholder filed a class action on behalf of all persons or entities that purchased or otherwise acquired Lottery.com, Inc. (NASDAQ: LTRY) securities between November 15, 2021 and July 29, 2022, for violations of the Securities Exchange Act of 1934. Lottery.com is a technology company that operates a business-to-consumer (B2C) platform enabling players to remotely purchase legally sanctioned lottery games in the U.S. and internationally.
According to the complaint, on July 6, 2022, Lottery.com disclosed that an internal investigation had uncovered “instances of non-compliance with state and federal laws concerning the state in which tickets are procured as well as order fulfillment.” In addition, the investigation revealed “issues pertaining to the Company’s internal accounting controls.” In light of the findings, on June 30, 2022, the board of directors terminated the Company’s President, Treasurer, and Chief Financial Officer Ryan Dickinson, effective July 1, 2022. On this news, Lottery.com’s shares fell $0.15, or more than 12%, to close at $1.07 per share on July 6, 2022.
On July 15, 2022, Lottery.com announced that Chief Revenue Officer Matthew Clemenson had resigned on July 11, 2022, effective immediately. Reporting on the internal investigation, the Company revealed that it “preliminarily conclude[d] that it has overstated its available unrestricted cash balance by approximately $30 million and that, relatedly, in the prior fiscal year, it improperly recognized revenue in the same amount. The Company, in consultation with its outside advisors, is currently validating its preliminary conclusion, assessing any impact on previously issued financial reports, and has begun to institute appropriate remedial measures.” On this news, the Company’s stock price fell more than 14.5%, to close at $0.82 per share on July 16, 2022.
The Company made a series of additional adverse disclosures before finally, on July 29, 2022, in a Form 8-K filed with the SEC, informing the market that it did not have “sufficient financial resources to fund its operations or pay certain existing obligations,” and that it therefore intended to furlough certain employees effective July 29, 2022. Moreover, because Lottery.com’s resources were not sufficient to fund its operations for a twelve-month period, “there is substantial doubt about the Company’s ability to continue as a going concern,” and the Company may be forced to wind down its operations or pursue liquidation of the Company’s assets. On this news, shares of Lottery.com lost 64% of their value in a single trading day, falling $0.52 per share to close at $0.29 per share on July 29, 2022.
Next Steps: If you acquired shares of Lottery.com, Inc. between November 15, 2021 and July 29, 2022, you have until October 18, 2022, to ask the court to appoint you lead plaintiff for the class. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.