Swedish live casino supplier Evolution Gaming has seen $3bn wiped off its share value after rumours started circulating that it was operating in jurisdictions which prohibit gambling.
Then on December 2 news broke of a large-scale bust of a crypto gambling ring in Vietnam. Some of those arrested claimed they had been working as affiliates for the company, sending it traffic from Vietnam.
The Vietnamese raid seems to be unrelated to the original allegations against Evolution, which saw regulators in New Jersey tipped off that Evolution was allegedly operating in prohibited jurisdictions, including Iraq, Syria and Sudan.
It appeared that a rival company had hired private investigators to uncover the apparently nefarious trading activities of its competitor.
The organisation behind the claims is yet to make itself known, although it claims to be acting out of a wish to “level the playing field”. Instead, it communicated the allegations via lawyer Ralph Marra, who is currently senior counsel with Calcagni & Kanefsky but has also been lead counsel for the New Jersey Sports and Exposition Authority and acting U.S. attorney for the District of New Jersey.
On the one hand, particularly since the Vietnam bust, one is inclined to assume there is no smoke without fire; on the other, it is curious that whoever is behind the allegations is keeping such a low profile.
It all has the unpleasant odour of a gambling industry of old, one that operates in the shadows and is now perhaps employing unseemly tactics to capture a slice of the newest and most profitable market, the U.S.
Many hoped such connotations had been left in the past, as newer, bolder enterprises forged forwards with promises of regulatory compliance, customer protection and a focus on becoming part of the broader entertainment industry, rather than merely a seedy vice industry.
For its part, Evolution has sought to emphasise its position in the market as a business-to-business supplier, distinct from the operator, which runs a business-to-customer model.
In a statement on November 24, Evolution stated: “Evolution does not handle any players or any of the players’ money. Evolution provides a service to the operator who in turn provides their services to the players. It is the operator’s responsibility to conduct a KYC on each player and decide what markets to focus on and what players to accept. It is the operator’s responsibility to comply with their regulation and their license.”
It went on to confirm that it does work with regulators and operators to the extent that it needs to be compliant or assist them to be compliant, but it was clear that from Evolution’s perspective, the acquisition of players was outside of its remit and responsibility for that lay with the operators.
“It has been falsely alleged that Evolution games are accessible directly from countries under U.S. sanctions. This is not the case without sophisticated technical manipulation. According to allegations made in the anonymous and dubious report, active manipulation of Evolution’s systems has been deployed to create the impression that play from such countries was possible”, the statement continued.
“This use of Evolution’s content, through an operator that was not an Evolution customer but connected to an aggregator which Evolution has as a customer, was seemingly conducted by first establishing a VPN-tunnel from an IP-address in a blocked country to obtain an IP address in an accepted country. From this IP-address a connection through the operator to Evolution’s lobby was made, clearing all geographical IP checks, and a session was established with the browser. Thereafter, the VPN from the accepted IP address was terminated, while the content session remained active in the browser. The first IP address from the blocked country remains active. Prior to those steps, multiple attempts to connect directly from the IP address in the blocked country were rejected. This is a deliberate course of action to circumvent a broadly accepted and well-established process to check users’ geographical location, with the purpose of discrediting Evolution”.
It’s a stark reminder of how quickly reputational damage can undermine performance. Evolution has long been considered a leading light of igaming innovation. But it’s shares were reported to have taken a 19% nose-dive almost instantly that the New Jersey allegations were made and had fallen 31% across the week the allegations were made.
Evolution has launched an internal investigation in a bid to establish whether there is any truth in the allegations. This seems primarily a way to satisfy the New Jersey Division of Gaming Enforcement, which was in receipt of the complaint and is also looking into it.
The Malta regulated game developer was founded by its current chairman, Jens von Bahr, in 2006 and quickly went on to launch live casino studios in Spain, Latvia, Malta, Belgium and Romania.
In 2015, it listed on the Stockholm Nasdaq and last year it made the high-profile strategic acquisitions of NetEnt, NetEnt Casino and Red Tiger. Evolution was undoubtedly at the top of its game before someone decided to unleash these revelations.
The company’s third quarter results revealed a 97% increase in operating revenues to €276m ($311m) and EBITDA growth of 113% to €192.9m ($217.6), just weeks before the controversy around illegal jurisdictions started to unfold.