How PlayUp’s rollercoaster ride with FTX ended in legal battle
Like Bankman-Fried, he thought sports betting and other gambling services were a natural fit with crypto investing.
“The original deal was a good deal because they had seven million credit cards on file. And we believed that they’re already gamblers being in the crypto space, and it would have been a very good transition from an FTX client to a betting client,” Simic says.
“The plan was originally to have the first fully regulated sports book and crypto exchange in one. And that’s what we were working towards back when we announced the deal originally with FTX, and why they wanted to purchase us in November 2021.”
It is easy to imagine the mood when the PlayUp board met barely a week later in Sydney to discuss the deal and the future of its US chief executive Laila Mintas, whose contract was due to expire within days.
Relations with Mintas, who was originally meant to be part of the delegation to the Bahamas, had frayed as negotiations bogged down over her push for a higher salary, as well as bigger stake in PlayUp that would be commensurate with the success she had helped generate.
She had also been expressing disquiet at accepting the $US450 million valuation of PlayUp and side deals being negotiated by other executives and the board. This included the acquisition of PlayChip – a separate business which had developed a crypto token for the gaming sector – and bonuses for Aussie executives.
Court documents show just how quickly the wheels fell off the takeover deal on that day.
It emerged that the official PlayUp negotiating team were not the only ones to meet with Bankman-Fried and his executives that November Monday in the Bahamas.
Mintas confirmed she had also met with Bankman-Fried and his team just after her fellow PlayUp executives did. She also held meetings with FTX over subsequent days.
She said FTX voiced concerns about the deal and indicated that they did not intend to proceed further.
Shortly after the PlayUp board meeting concluded, an email from one of FTX executives negotiating the deal, Ramnik Arora, confirmed just that. The deal was off.
Key parts of the email, detailed in Federal Court documents, echoed what Mintas had conveyed to the PlayUp board hours earlier.
“To our surprise, key personnel from the US business are not part of the future of the business,” Arora said.
“There is discontent within the team and the board on valuations. We don’t want employees to feel that they’ve had to forgo better options and therefore aren’t motivated to work under FTX … we’ve decided against pursuing a full acquisition at this time.”
The argument over who is to blame for the deal’s collapse is now the subject of a legal battle that stretches from the US District Court in Nevada to the Federal Court in Sydney.
The allegations made by PlayUp against its former US boss are explosive.
PlayUp claimed in the Nevadan court that Mintas threatened to “burn PlayUp to the ground” and derail the sale to FTX if the board did not meet her demands for a new contract. This included doubling her salary to $US1 million, making her global chief executive – replacing Simic – and lifting her stake in PlayUp from about 10 per cent to 15 per cent.
Mintas has denied the allegations that she sabotaged the takeover and said the actions of other PlayUp executives were to blame for the deal’s collapse. She also lodged a counterclaim in the US courts alleging fraud and defamation by PlayUp.
Lawyers representing her in Nevada declined to comment.
An email Mintas sent to PlayUp executive Michael Costa on November 15 – the day of the big meeting with FTX and Bankman-Fried – showed just how far things had broken down between the senior team at that delicate stage.
“Dan [Simic] tried for himself and maybe for you Mic to get some side deals done and the board and more importantly, the shareholders, have NO transparency on what’s going on since 3 month (sic) up to now. For me it’s even more suspicious that you don’t want me to be there, especially as I have been invited by FTX and Sam [Bankman-Fried],” said the email, which was revealed in Federal Court documents.
“Are you aware and did you tell FTX that those deals below won’t close if I am not involved any more? You are risking the entire deal here.”
Mintas also claimed she was central to any deal, as FTX wanted her to continue as head of PlayUp’s prized US business.
FTX’s interest in PlayUp did not falter upon her departure. PlayUp publicly announced FTX’s $US35 million investment just weeks after the takeover fell through, with supportive wording from FTX’s Arora, who said: “We believe PlayUp is at a pivotal moment in its corporate journey.”
Simic was still pursuing a potential takeover deal with FTX until August last year, but he says PlayUp was reluctant to do a deal while litigation with Mintas was afoot.
“Daniel [Simic] and the PlayUp team did a great job re-engaging with FTX. In fact, Daniel spent two months in the Bahamas with them in mid-2022,” said Richard Sapsford, PlayUp’s largest shareholder and chairman.
“FTX actively supported PlayUp and facilitated introductions to new investors. PlayUp did have a significant funding agreement with another party but unfortunately didn’t proceed after the collapse of FTX,” he says.
The collapse of the FTX deal was a big blow, as was the failure this month of a deal to list on Nasdaq.
Still, PlayUp is still a long way from the chaos that presided over the collapse of its namesake in 2016.
The original PlayUp barely generated revenue, let alone earnings, to justify a cast of stars that included former NSW premier Nick Greiner as chairman of its parent company, Revo Pty Ltd.
The board included pokies billionaire Bruce Mathieson and former Telstra chairman Bob Mansfield. It’s host of brand ambassadors included cricketing stars, such as Steve Waugh and Adam Gilchrist, to help promote its suite of fantasy sports products.
‘They went through it [$100 million] in about two years. I shake my head as to what they thought they were doing.’
PlayUp chief executive Daniel Simic
But the company was creating problems for Turnbull before its collapse. This included a potential conflict of interest which emerged when his family invested $1.3 million in 2012, when he was shadow communications minister. His portfolio included online gaming.
Turnbull insisted that PlayUp was not a gambling business.
If it is any consolation, PlayUp’s Simic agrees. He also thinks it is part of the reason why the original company went bust. It was trying to generate revenue from advertising as a social gaming platform.
“Advertising models in this industry don’t work,” says Simic.
Any pivot back to betting for the original company came too late. But there was also the liberal spending on overseas offices and sports brand ambassadors, which chewed up so much cash for little return.
“The money spent by Revo was mainly on sporting personalities, ambassadors, offices around the world and staff,” says Sapsford, who acquired the original assets from Revo along with Simic. “They went through it [$100 million] in about two years. I shake my head as to what they thought they were doing.”
For Turnbull, the bigger problem came when he tried to exit his investment in PlayUp/Revo. As it was a private company, the board came up with a workaround that let Turnbull exchange his shares for a secured loan to the company, rather than a sale of the shares to an external party.
When it all blew up, it meant the Tunbull family’s debt ranked ahead of staff who had successfully applied to wind the company up on the grounds it had not paid them their salaries.
Turnbull was prime minister by this time and it was a bad look, to say the least.
“Now there may well be criticism of the directors, there may well be criticism of whether an administrator should have been appointed sooner, all of those criticisms can be made, but they cannot be directed at external creditors such as ourselves,” Turnbull told parliament in March 2016, soon after the collapse.
The new PlayUp is faring much better. It now generates gambling turnover of about $500 million from its Australian operations, and revenue of almost $30 million, according to Simic, who says it is now making a profit.
However, the company is still focused on building its business in the all-important US market.
“I think we’re being realistic about it, the US market is a very viable market, but it is still nascent and will take time to settle and mature. The secret is to get US market access while it is available, keep costs low, forget user land grabs and grow sustainably,” says Sapsford.
However, the US is not the only target.
“The PlayUp name is known in India and has a large social following,” says Simic. “India will be a key market for us in the near future, given the country intends to regulate online fantasy sports and sports betting.”
PlayUp might want to tempt Waugh and Gilchrist back to the crease for a comeback, if that’s the case.
Read More: How PlayUp’s rollercoaster ride with FTX ended in legal battle
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