Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Shareholders' Suit Over Video Game Developer's IPO

By Ellen Bardash
March 01, 2021

Two former shareholders allege in federal court that an auto-racing video game creator swindled them out of more than $200 million in stock. In a complaint filed last month in the U.S. District Court for the District of Delaware, HC2 Holdings 2 Inc. and Continental General Insurance Co. allege majority shareholder Motorsport Games Inc. portrayed 704Games Co. as being unprofitable and bought out their shares for $1.2 million, then months later went public with shares trading at more than 170 times that buyout value. The latter company developed video games based on NASCAR racing. HC2 Holdings 2 Inc. v. Motorsport Games Inc., 1:21-cv-00165.

The plaintiffs claim Motorsport Games and executives intentionally defrauded their investors in order to buy out their stock for much less than they knew it would be worth when the shares were publicly traded. "Motorsport Games abused its fiduciary position as controlling stockholder in 704Games to defraud minority investors and enrich itself by grossly misleading them about the company's near-term prospects," an HC2 Holdings 2 spokesperson said.

Named as defendants in the case, in addition to Motorsport Games, which is based in Miami and converted from a Florida limited liability company to a Delaware corporation on January 8, are Mike Zoi, manager of Motorsport Network, which is Motorsport Games' controlling shareholder; and Dmitry Kozko and Jonathan New, CEO and CFO, respectively, of Motorsport Games.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
How Secure Is the AI System Your Law Firm Is Using? Image

In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.

COVID-19 and Lease Negotiations: Early Termination Provisions Image

During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.

Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support Image

The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.

The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies Image

Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.

Authentic Communications Today Increase Success for Value-Driven Clients Image

As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.