SBTech To Secure $30M Following Cyber Breach
April 14, 2020
On March 27, leading sports betting platform and full-support tech provider SBTech had no other option but to shut down its entire suite of datacentres, exceeding 50 in number, for which it has how had to put up a retainer fund totalling $30 million so as to make provision for any future damages claims lodged by its member-partners. The mass power-down followed a tip-off received about a possible cyber-attach and data-compromising breach. Knowledge about the breach was brought to the attention of the provider’s team of cyber-security experts early on Saturday morning, after which a power-down order was immediately issued, effectively taking all sportsbooks running on SBTech platforms offline.
The total downtime lasted 72 hours at most for the majority of sportsbooks, save for a few platforms that have reportedly yet to be brought back online. Most have however been powered back on and are now back to running at full capacity. The company has since the news about the breach and retainer-fund having gone public, issued the assurance that absolutely no data had been breached and that the funds set aside for future claims are merely part of a precautionary measure.
Covering All Contingencies
The $30 million now deposited into trust authorisation was ordered to be set aside in this manner by the mediator-entity overseeing SBTech’s merging with fantasy sports betting giant DraftKings, namely Diamond Eagle Acquisition Corporation. The entity deemed it reasonable that the money be set aside in the event that any future claims were to arise from the recent breach, and so as to absolve the future combined entity from any claims brought against SBTech at the time of its having been a separate and independent entity, pre-merger.
The safety fund will be kept active and the money retained for a period lasting at least 24 months, Diamond Eagle Acquisition Corp. has confirmed. The security asset will be made up of $10 million of the $600 million cash consideration in terms of the original merger agreement, as well as $20 million in combined company shares.
The amount to be secured has since the incident in question been confirmed by way of an amended merger-agreement signed between the parties and duly filed with the U.S. Securities & Exchange Commission.
Further Claims Covered Too
The amended merger agreement furthermore makes provision for additional amounts to be secured in the event that the amount of money now escrowed for the purpose of possible future claims, proves insufficient. This means that an additional $25 million in cash, along with $45 million in combined entity shares will be retained in a special account to be administrated by SBTech. If the additional amounts should be depleted before all future claims are satisfied, then the onus will be on founder and majority shareholder Shalom McKenzie, along with the entire party of current SBTech majority shareholders, each in his or her personal capacity, to satisfy any and all future claims. This provision has apparently been agreed to by all current SBTech sellers.
Diamond Eagle Corporation has emphasised that the merger will continue despite the recent breach and that the virtual meeting scheduled for the purpose of officiating the merger as official, has been bumped up to an only slightly later date.
SBTech has also confirmed that no claims as a result of the cyber-attack has been lodged as of yet. The expectation is that since investigations have revealed that absolutely no data has been breached or transferred to any third party, no claims will be lodged at any point in the future either. The money will be released to SBTech’s current sellers once the two-year period has lapsed claims-free.