How PlayUp’s roller coaster ride with FTX ended in litigation
Like Bankman-Fried, he thought sports betting and other gambling services were a natural complement to crypto investing.
“The original deal was a good deal because they had seven million credit cards on file. And we believed that they are already players in the crypto space and it would have been a very good transition from an FTX client to a betting client,” says Simic.
FTX’s Talisman Founder, Sam Bankman-Fried.Credit:Bloomberg
“The original plan was to have the first fully regulated sports book and crypto exchange in one. And that’s what we were working towards when we originally announced the deal with FTX and why they wanted to buy us in November 2021.”
One can well imagine the atmosphere when the PlayUp board met in Sydney less than a week later to discuss the deal and the future of US boss Laila Mintas, whose contract was due to expire in a few days.
Relations with Mintas, who was originally scheduled to be part of the Bahamas delegation, had stalled as negotiations over her seeking a higher salary as well as a larger stake in PlayUp commensurate with the success she had helped facilitate , stalled .
She had also expressed concern that she was accepting PlayUp’s $450 million valuation and side deals being negotiated by other executives and the board. These included the acquisition of PlayChip – a separate company that had developed a crypto token for the gaming sector – and bonuses for Australian executives.
Court documents show how quickly the wheels of the takeover deal fell off that day.
It turns out the official PlayUp negotiating team wasn’t the only one meeting with Bankman-Fried and his executives in the Bahamas that Monday in November.
Mintas confirmed that she also met with Bankman-Fried and his team shortly after her PlayUp peers. She also held meetings with FTX in the following days.
She said FTX has raised concerns about the deal and indicated they have no intention of going ahead.
Shortly after the conclusion of the PlayUp board meeting, an email from Ramnik Arora, one of the FTX executives negotiating the deal, confirmed just that. The deal fell through.
Key portions of the email, detailed in federal court documents, mirrored what Mintas had conveyed to the PlayUp board hours earlier.
“To our surprise, key people from the US business are not part of the company’s future,” Arora said.
“There is dissatisfaction in the team and on the board about reviews. We don’t want people to feel like they’re missing out on better options and as a result aren’t motivated to work under FTX… we’ve decided against full adoption at this point.”
The controversy over who was to blame for the deal’s failure is now the subject of a legal battle stretching from the US District Court in Nevada to the Federal Court in Sydney.
PlayUp’s allegations against its former US boss are explosive.
PlayUp alleged in the Nevada court that Mintas threatened to “burn PlayUp down” and derail the sale to FTX if the board didn’t meet their demands for a new contract. These included doubling her salary to $1 million, being named global chief executive — replacing Simic — and increasing her stake in PlayUp from about 10 percent to 15 percent.
Mintas has denied allegations that she sabotaged the takeover, saying the actions of other PlayUp executives were to blame for the deal’s failure. She also filed a counterclaim in US courts alleging fraud and defamation by PlayUp.
PlayUp also negotiated a sale to FTX before the crypto giant collapsed in November.Credit:AP
Attorneys representing her in Nevada declined to comment.
An email Mintas sent to PlayUp manager Michael Costa on November 15 – the day of the big meeting with FTX and Bankman-Fried – showed how far things had collapsed between the senior team at this delicate stage.
“Dan [Simic] has been trying to do some side business for himself and maybe you Mic and the board and most importantly the shareholders have NO transparency as to what has happened for the past 3 months (sic) up to now. To me it’s even more suspicious that you don’t want me there, especially since I was invited by FTX and Sam [Bankman-Fried]’ the email said, which was uncovered in federal court documents.
“Are you aware and have you told FTX that the deals below will not be completed if I am no longer involved? You’re risking the whole deal here.”
Mintas also claimed she plays a central role in any deal as FTX wanted her to remain head of PlayUp’s valuable US business.
FTX’s interest in PlayUp did not wane even after their departure. Just weeks after the acquisition’s failure, PlayUp publicly announced FTX’s $35 million investment, with words of support from FTX’s Arora, who said, “We believe PlayUp is at a pivotal moment in its corporate journey located.”
Simic was still pursuing a potential takeover deal with FTX until August last year, but he says PlayUp was reluctant to finalize a deal while a legal battle with Mintas was ongoing.
“Daniel [Simic] and the PlayUp team did a great job getting back into FTX. In fact, Daniel spent two months with them in the Bahamas in mid-2022,” said Richard Sapsford, PlayUp’s largest shareholder and chairman.
“FTX has actively supported PlayUp and facilitated adoption to new investors. PlayUp had a significant funding deal with another party but unfortunately got stuck following the collapse of FTX,” he says.
The collapse of the FTX deal was a major blow, as was the failure of a deal earlier this month to get listed on the Nasdaq.
Still, PlayUp is still a long way from the chaos that unleashed its namesake’s collapse in 2016.
The original PlayUp generated scant revenue, let alone revenue to justify a star cast that also includes former NSW Premier Nick Greiner as chairman of parent company Revo Pty Ltd.
The board included gaming billionaire Bruce Mathieson and former Telstra chairman Bob Mansfield. Among the many brand ambassadors were cricket stars such as Steve Waugh and Adam Gilchrist who would help promote his range of fantasy sports products.
“You went through it [$100 million] in about two years. I shake my head at what they thought, what they did.’
PlayUp Managing Director Daniel Simic
But the company was causing problems for Turnbull before its collapse. That included a potential conflict of interest that arose when his family invested $1.3 million in 2012 when he was Secretary of Shadow Communications. His portfolio included online gaming.
Turnbull insisted that PlayUp was not a gambling business.
If it’s any consolation, PlayUp’s Simic agrees. He also believes this is part of the reason the original company went bust. It attempted to generate revenue from advertising as a social gaming platform.
“Advertising models don’t work in this industry,” says Simic.
Any return to betting on the original company came too late. But there was also the liberal spending on foreign offices and sports brand ambassadors, which ate up so much money for little return.
“Most of the money spent by Revo was spent on athletes, ambassadors, offices around the world and employees,” says Sapsford, who bought Revo’s original assets with Simic. “They pulled it off [$100 million] in about two years. I shake my head at what they thought they did.”
For Turnbull, the bigger problem came when he tried to exit his investment in PlayUp/Revo. Because it was a private company, the board found a workaround that allowed Turnbull to exchange his stock for a secured loan to the company, rather than selling the stock to an outside party.
When it all exploded, it meant the Tunbull family’s debts ranked ahead of employees who had successfully petitioned to have the company dissolved for failing to pay their salaries.
Turnbull was Prime Minister at the time and things were looking bad, to say the least.
“Now there may well be criticism of the directors, there may well be criticism as to whether a trustee should have been appointed earlier, all of that criticism can be made but it cannot be directed at outside creditors like ourselves,” Turnbull told dem Parliament in March 2016, just after the collapse.
The new PlayUp performs much better. It now generates about $500 million in gaming revenue from its Australian operations and nearly $30 million in revenue, according to Simic, who says it is now profitable.
However, the company remains focused on building its business in the all-important US market.
“I think we’re being realistic, the US market is a very viable market, but it’s still nascent and will take time to establish and mature. The secret is to get access to the US market while it’s available, keep costs down, forget user land grabs and grow sustainably,” says Sapsford.
However, the US is not the only target.
“The PlayUp name is well known in India and has a large social following,” says Simic. “India will be a key market for us in the near future as the country intends to regulate online fantasy sports and sports betting.”
PlayUp might want to lure Waugh and Gilchrist back into the fold for a comeback, if that’s the case.
https://www.smh.com.au/business/companies/how-playup-s-rollercoaster-ride-with-ftx-ended-in-legal-battle-20230124-p5cf3y.html?ref=rss&utm_medium=rss&utm_source=rss_business How PlayUp’s roller coaster ride with FTX ended in litigation
