SBTech to Set Aside a $30 million Rainy Day Fund to Deal with Cyberattack Repercussions

SBTech, one of the most dominant technology providers for online betting companies, has no choice but to place a $30 million security fund in escrow to cover any budding costs of an alleged ransomware attack on their servers last month.

The company had to agree to put in place financial security measures after the terms of the merger acquisition deal facilitated by the DEAC (Diamond Eagle Acquisition Corporation) changed. From this arrangement, two rival companies; SBTech and Draftkings are planning to merge later this year in a bid to soar to greater heights in the iGaming business.

Based on documents filed with the US Securities Exchange Commission, DEAC demanded that SBTech must put down $10 million in cash and $20 million in stock in an escrow fund for the next two years. These funds will be set aside to cover any expenses that could arise as a result of the suspected ransomware attack that took out SBTech servers on March 27th.

SBTech Could be Facing Multiple Lawsuits from the Alleged Cyberattack

The blank-check company, DEAC, which agreed to pay around $600 million to facilitate the acquisition of DraftKings by SBTech last year, expects lawsuits for any lost revenue from both US and international partners during the downtime. This is one of the primary reasons for establishing the $30 million fund to counter the losses that SBTech’s partners may have been incurred thanks to the cybersecurity incident.

However, in case there are no lawsuits or any other damages to be paid, the lock-up stocks and cash will be refunded back to SBTech. On the other hand, should the expenses incurred as a result of the cyberattack goes beyond this $30 million backup fund, DEAC indicated that it would have an additional $70 million (stock: $45 million, cash: $25 million) sitting in escrow to cover the expenses.

Initially, this second fund had been set up as a safety net for any unanticipated SBTech-related operational fines and lawsuits. Moreover, in the event that both cushion funds don’t fit the bill, DEAC said that it would move to pursue resources from the current owners of SBTech.

DEAC Shareholders yet to Agree to the New Terms of the Acquisition

As we speak, the SBTech shareholders have already agreed to the new acquisition terms, but the DEAC stakeholders haven’t done the same yet. DEAC’s investors were supposed to approve the acquisition merger last week, on April 9th, but then, in view of the SEC filing and new terms for the acquisition, DEAC has further delayed the decision to April 23rd to give the shareholders enough time to review the terms.

At the time of the alleged cyberattack incident, the SBTech infrastructure was down and out for about a week before everything came back online. After their systems were up and running, they got back to offering service to their international partners except for their US clients. To date, the company is still waiting for approval from the respective US gambling regulators so that they can resume offering services to their US customers.