Online betting company SBTech will have to place $30 million in escrow as insurance for covering the fallout from a cybersecurity incident that took place last month.
The company agreed to do so as part of re-negotiated acquisition terms with Diamond Eagle Acquisition Corporation (DEAC), a blank-check company that acquired SBTech and rival platform DraftKings and is planning on merging the two later this year.
https://www.sec.gov/Archives/edgar/data/1772757/000110465920044518/tm2015358d1_8k.htmIn a filing with the US Securities Exchange Commission, DEAC said SBTech must place $10 million in cash and $20 million in stock in an escrow fund for the next two years.
The funds will be used to deal with any expenses caused by a "cybersecurity incident" that took place on March 27.
As reported by Legal Sports Report at the time, SBTech's platform went down in an incident that looked like a classic ransomware infection. Hundreds of third-party websites that relied on SBTech's sports betting and online casino platform went down.
The SBTech was down for almost a week before it resumed service with international partners, but not with its US customers. The company is still waiting for approval from US gambling regulators before returning service to US partners.
DEAC, which agreed to pay around $600 million for SBTech last year, is expecting lawsuits for lost revenue from both international and US partners and has established the $30 million fund to deal with any fallout from last month's security incident.
If no litigation ensues, the cash and locked-up stocks will return to SBTech ownership. If expenses go over the $30 million emergency fund DEAC said it would dip into another $70 million ($25 million in cash and $45 million in stock) that also sits in escrow. This second fund was set up part of the initial acquisition deal as a safety blanket for unforeseen SBTech-related operating fines and litigation.
If the $100 million is still not enough, DEAC said it would pursue further funds from SBTech's current owners.
According to iGaming Bussiness, which first reported on the SEC filing, SBTech's management agreed to the fund and the new acquisition terms.
DEAC shareholders were supposed to approve the SBTEch acquisition this week, on April 9, but in light of the SEC filing and the new acquisition terms, DEAC has delayed the decision to April 23 to give shareholders the time to review terms.
ZDNet approached SBTech representatives for comment two weeks ago when the company suffered its security incident, but we never received a reply.