Legal Action Taken Against Evolution for Failure to Disclose and Comply with Regulations

A lawsuit has been filed against Evolution by consumer and class action specialists Federman & Sherwood, alleging that the company deceived investors regarding its growth trajectory and compliance with US law. The lawsuit covers the period between February 14, 2019, and October 26, 2023, seeking to recover damages on behalf of investors who purchased Evolution securities.

Evolution has faced regulatory challenges, including allegations of breaching US sanctions and operating in countries black-listed by the US. In November 2021, the company was accused of conducting business illegally in several markets, resulting in a substantial decline in its share price. A January 2022 analyst report suggested that a significant portion of Evolution’s revenue could be at risk due to potential regulatory clampdowns.

In April 2022, Australia’s gambling regulator requested ISPs to block unlicensed online gambling sites, five of which were Evolution customers, leading to a decline in the company’s share price. The Swedish Administrative Court upheld a record fine on an Evolution customer, ComeOne Group, resulting in an 11% drop in shares. Reports of industry entities lobbying against the UK’s planned gambling laws overhaul also impacted Evolution’s shares.

Evolution’s financial reports revealed several underlying challenges, showcasing stagnant North American performance and flatlined overall growth, leading to share price declines. October 2023 marked the latest negative development for Evolution as it experienced delays in opening new studios, raising concerns regarding the company’s long-term prospects.

The plaintiff, Federman & Sherwood, alleges violations of Section 10(b) of the Securities Exchange Act and Rules and breaches of Section 20(a) of the Securities Exchange Act. The lawsuit claims that between January 24, 2022, and October 26, 2023, various disclosures revealed the truth about Evolution’s compliance, revenue, and growth, leading to a significant share price drop.

The lawsuit names Martin Carlesund, Evolution CEO, and Jacob Kaplan, chief financial officer as defendants. If the company did obfuscate its growing regulatory and compliance issues, it could have significant long-term repercussions. Evolution has not yet responded to the allegations.

Federman & Sherwood set a deadline of March 26, 2024, for investors wishing to participate in the legal action against Evolution. The class action lawsuit sheds light on Evolution’s challenges in maintaining regulatory compliance and the subsequent impact on its financial performance and shareholder value.