Last Updated on: 7th March 2024, 11:11 am
Woodford Eurasia has raised serious concerns about misleading statements issued by Lottery.com Inc., which inaccurately suggest that their ongoing legal battle has been resolved. Contrary to these claims, Woodford emphasizes that the dispute remains unsettled, particularly in light of Lottery.com’s failure to adhere to the terms of their loan agreement in December.
In December 2022, a loan agreement was established between Woodford and Lottery.com, under which Woodford provided over $2 million in the form of a convertible loan, with the potential for an additional $50 million facility. The terms of this agreement enable Woodford to convert the loan into shares of Lottery.com at a predetermined rate and to acquire the domain Sports.com, which is owned by Lottery.com, for $6 million. This agreement has been documented and is publicly accessible through SEC filings. The document is available here: (Page 51, Exhibit 10.1)
https://ir.lottery.com/static-files/0ea308ba-a43f-4a2b-8584-b5cb1a83696a#page51
The loan is secured against all of Lottery.com’s assets by a debenture, which grants Woodford the right to appoint a receiver for the liquidation of Lottery.com’s assets in case of default.
By June 2023, Woodford had disbursed a total of $2,159,838.15 to Lottery.com as per the loan agreement, a fact recognized by Lottery.com in Clause 4.2 of the Amended and Restated Loan Agreement. These funds were crucial in restructuring the company’s financial reports to meet the requirements of Nasdaq and the SEC, and in developing a comprehensive strategy for business development. As a result, in June 2023, the Nasdaq hearing panel allowed Lottery.com to continue its trading on the exchange, marking an end to a period of turmoil initiated by accusations against the company’s founders Antony DiMatteo, Matt Clemenson, Ryan Dickinson, and the previous management for overstating revenues, which led to investigations by the SEC and DOJ.
Breach of Loan Agreement by Lottery.com
Following the Nasdaq’s favourable decision for Lottery.com, the company’s Board of Directors notified Woodford in July 2023 that Woodford had been replaced as a creditor by another entity, UCIL, allegedly owned by Lottery.com’s supposedly independent directors, Matthew McGahan and Barney Battles. This move is viewed as a serious breach of SEC and Nasdaq regulations. Additionally, the signing of a new loan agreement with UCIL, which replicated the terms of the Woodford loan agreement, also represents a blatant violation of the agreement with Woodford.
Lottery.com further violated the Woodford Loan Agreement by dismissing interim CEO and corporate restructuring expert Mark Gustavson after he uncovered and disclosed improper conduct by certain board members. In an attempt to conceal their misdeeds, Matthew McGahan assumed the roles of CEO, President, Secretary, and Chairman, while Barney Battles remained as the Head of the Audit Committee. Background checks on actor Tamer Hassan and other board members reveal prior connections and business dealings among them, which do not meet the independence criteria for directors, thus putting Lottery.com in violation of the Nasdaq Majority Independent Board rule.
Subsequently, Lottery.com experienced a significant decrease in market capitalisation, with its share price dropping from $3.3 in late August to $1.3 by early November. Woodford attempted to convert part of its loan into shares as per the agreement, but this request was ignored. Instead, the board announced the allocation of substantial quantities of company shares to directors and their advisors without disclosing the specifics.
Proxy Vote and Shareholder Dilution
In November, Lottery.com announced a proxy vote for the issuance of shares and warrants up to $200 million, leading to a change in control and significant dilution of the holdings of all existing shareholders.
Woodford and its affiliates filed a legal challenge in a Delaware court in an attempt to halt the share issuance, which was the result of an improperly conducted proxy vote. The court allowed the proxy vote to proceed, despite some shareholders being deprived of the opportunity to vote. Woodford believes the court’s decision was influenced by the last-minute nature of the filing, as the proxy vote had been expedited by the board.
After Lottery.com defaulted on the loan repayment in December, Woodford opted not to pursue the Delaware lawsuit further, focusing instead on enforcing the debt for more immediate relief. However, Woodford and its affiliates reserve the right to reinstate the Delaware lawsuit if circumstances change. Woodford remains convinced that the proxy vote was not conducted properly.
Woodford’s Response to Lottery.com’s Default
Woodford made several attempts to resolve the dispute with Lottery.com amicably, including an offer to invest an additional $10 million, which was ignored. Woodford also issued a notice to exercise its option to purchase Sports.Com as stipulated in clause 12 of the loan agreement, but this was also disregarded. Nonetheless, the notice was legally served, and Woodford holds a contractual right to Sports.Com, enforceable through legal action if necessary.
Following Lottery.com’s failure to meet its repayment obligations in December, Woodford served a notice of default, making the security granted to Woodford over all of Lottery.com’s assets enforceable. Woodford is currently seeking legal advice on the most effective means to enforce this security.
Directors Award Themselves New Shares
In February 2024, Lottery.com finally disclosed the recipients of shares awarded since the UCIL announcement, revealing that Lottery.com board members, including McGahan and Battles, had allocated significant shares to themselves, resulting in severe dilution for all existing shareholders.
It was particularly concerning to discover that 6.1% of shares had been awarded to Mr. Andrey Ryjenko, who now uses his wife’s surname, Nikitin, and is publicly acknowledged as a consultant to the board. Ryjenko’s prior high-level position at the European Bank for Reconstruction and Development and his conviction for fraud in 2017, resulting in a three-year prison sentence, raise serious questions about his suitability for involvement with a company listed on Nasdaq.
The February 2024 disclosure revealed that board members of Lottery.com had collectively awarded themselves over 40% of the company’s shares, significantly diluting the stakes of existing shareholders. Woodford alleges that such actions constitute corporate raiding.
During a court hearing on January 5, 2024, in Tampa, Florida, Greg Potts, the current COO, testified that he had received shares in the company as part of a “retention bonus” and for “unpaid salary.”
Currently, Lottery.com lacks legitimate employees on its payroll and has no active business operations or revenue streams apart from TinBu, LLC, a company Lottery.com acquired under false pretences and has failed to pay for as agreed. The founders of TinBu are now suing Lottery.com for $20 million for fraud.
“We have tried many times to mediate or settle this dispute in an amicable way. We are shareholders of this company and are committed to supporting it all the way through. It is unfortunate that Lottery management keeps making false accusations, issuing incorrect news releases and announcements, abusing legal processes, and manipulating, so we now have no choice but to enforce our security, which will undoubtedly cause disruption of business and further loss of value for Lottery. It is unfortunate that the actions of individuals in their own interest can lead to such damage to a corporation, and we are surprised how a publicly traded company can lack independent oversight and compliance.”
“What Matthew McGahan and Barney Battles are trying to do is wrongful on so many levels. Now they have teamed up with Andrey Ryjenko, who is a convicted fraudster, and together they are trying to complete this corporate raid by awarding themselves shares and lining their pockets with cash at the expense of all Lottery shareholders. Historically, lottery investors have suffered from mismanagement and larceny. Enough is enough, and we now have all the means necessary to put an end to this outrage.” Woodford Spokesperson
