Far-reaching fallout from 2016 arrests
Crown Resorts investors are going after the company in federal court with a class action lawsuit claiming significant financial harm from the 2016 arrests of Crown employees in Mainland China.
“The class action centers on a sharp price drop of almost 14 percent on 17 October 2016, suffered by Crown shareholders in the aftermath of 18 Crown employees having been arrested and detained in China in relation to alleged gambling crimes,” said a statement from Maurice Blackburn Lawyers, which will handle the case.
The lawsuit contends that investors were among the victims when the employees were arrested for illegal marketing in China. The suit says shareholders should have been “apprised of the risks that Crown was taking in China and the threat they posed to the company’s revenue streams,” said Maurice Blackburn head of class actions Andrew Watson.
The law firm also took aim at Crown’s “significant investment in its Sydney venture at Barangaroo, which had been hyped as a VIP-focused casino and luxury resort.”
Crown’s share price plummeted from AU$12.95 to AU$11.15 on the day of the arrests, reported the Sydney Morning Herald. Watson said collective losses exceed AU $100 million (US$759.8 million), and as a result, investors paid “an inflated price” for Crown Resorts shares. “It is that inflation that this potential class action will seek to recover on behalf of aggrieved shareholders,” added the law firm.
The suit will be open to investors who bought shares between February 6, 2015 and October 2016, and will cover all investors in this period, reported the Asia Gaming Brief.
The employees in question were rounded up in an overnight raid and jailed for between nine and 10 months in a Shanghai detention center. The last of the detainees, including Crown’s head of international VIP operations Jason O’Connor, were released from prison in August and deported.
The company then declared its intention to review its VIP strategy. Executive Chairman John Alexander said at the time, “We will wait until the China situation is resolved, and then we are going to sit down and consider our long-term position. Until this is finally resolved we are stepping back from an aggressive position in the VIP market.”
