Grant Johnson, the recently fired CEO of Esports Entertainment Group, has launched a lawsuit against his former employer, saying that the corporation breached his employment contract by dismissing him.
The Esports Entertainment Group board of directors urged Johnson to leave in December. This came at the end of a dismal year for the company, which included brand closures, a debt default, and the prospect of delisting.
Now, the company has stated in a recent prospectus for a share offering that Johnson has sued the company for breach of contract and wrongful termination.
In court files filed in the Southern District of New York district court, Johnson claims that EEG breached his employment contract in its claimed reasons for his dismissal. The former CEO's contract had been terminated "for reason," alleging allegations of fraud, intentional misconduct, and gross carelessness.
Esports Entertainment Group did not provide Johnson with any severance or payout for the balance of his contract, which stretched until 2025, after removing him for cause.
He will demand more than $1 million (£820,000/ €920,000) in damages, as well as 200,000 shares of EEG stock.
Johnson executive argued that the claims were baseless, and that even if true, they would not represent "for cause" under the strictly defined meaning given in the contract, that required "demonstrable and substantial injury to the company".
Johnson said that the Esports Entertainment Group board of directors had already investigated the issue in April 2022 and unanimously decided not to pursue it further.
Johnson's charges, according to Esports Entertainment Group, are unfounded.
“The company believes the claims are without merit and intends to defend against the claims vigorously.”
Following that, Esports Entertainment Group stated that the litigation did not pose a threat to the company "in which an adverse judgement could have a major detrimental effect," despite its already perilous financial status.
Finances for Esports Entertainment Group
In its May quarterly report, Esports Entertainment Group stated that there was "serious doubt" regarding the company's capacity to continue as a going concern for at least a year.
These financial difficulties are still visible in the most recent version.
According to EEG, the company's cash position as of January 12, 2023 was under $500,000.
Closures and sales in the iGaming industry
In December, Esports Entertainment Group stated that it was considering selling its remaining igaming assets in order to reduce its debts.
This comes following the announced closures of its SportNation and RedZone UK brands which the corporation said was for "a range of reasons including the economics of operating a small igaming business in the UK market".
Esports Entertainment Group subsidiary Argyll UK controlled both brands. The operator announced its exit strategy, which included relinquishing its licence to the Gambling Commission and refunding consumer deposits.
“As of December 31, 2022, approximately $200,000 still remained to be refunded to customers,” said the business. “Going forward, Argyll UK will comply with requests for refunds to the extent required by law and in accordance with Argyll UK’s terms and conditions”.
Esports Entertainment Group also provided an update on the company's ongoing sale of its Spanish igaming assets.
A letter of intent was signed in November 2022, and while the transaction was originally scheduled to finalise in December, it is now expected to close this month. The total profits are estimated to be $1 million, plus a $1 million deposit held by the Spanish regulator.
Esports Entertainment Group stated that 65% of the proceeds will go to a notesholder who had previously defaulted on its debts.
"The sale of the Spanish licence is subject to several closing conditions, which we cannot guarantee will be met. If the sale is not completed, the company's liquidity situation may suffer, which could have a negative impact on its financial condition and results of operations.
By fLEXI tEAM