New York listed Chinese sports lottery operator 500.com has been hit with multiple US investor class action federal suites over misrepresentation of its business practices and operations in the build up to its December 2013 IPO.
A group of US law firms representing 500.com investors have filed a federal securities fraud class action against the operator. They claim that the operator and its governance misled investors in its 2013 IPO prospectus, by stating that the company had the legal authorization to issue and sell lottery products in China.
The news of the lawsuits follow the suspension of 500.com lottery sales by a number of Chinese provincial lottery sales hubs, after the Chinese Ministry of Finance called for self-regulation of unauthorised lottery products.
The sales suspension saw 500.com NYSE shares fall to a 12 month low, prior to the announcement by the Chinese Ministry, 500.com had been dogged by rumours of it operating viability and accounting practices.
A group statement by the investors read
“As a result of these materially false and misleading statements and omissions as set forth above, 500.com securities traded at artificially inflated prices during the class period plaintiff and other members of the class purchased or otherwise acquired 500.com securities relying upon the integrity of the market price of 500.com securities and market information relating to 500.com, and have been damaged thereby,”
500.com is incorporated in the Cayman Islands, with corporate headquarters in Shenzhen China. The operator gained a World Lottery Association membership in October 2014.