Law Firm Investigation Concludes DraftKings Employee Did Not Engage in “Insider Trading”
In a document published over the weekend, daily fantasy sports site DraftKings shared a summary of the findings of an independent law firm hired to investigate the “insider trading” scandal. According to Greenberg Traurig, LLP, DraftKings’ written content manager, Ethan Haskell, did not use non-public information to his benefit when entering a fantasy football contest on competing site FanDuel.
You have almost certainly heard the story by now, but we will review it just in case you haven’t. On September 27th, Haskell posted a “percentage owned” chart of NFL players for the site’s Millionaire Maker contest on the DraftKings blog before all the NFL games for that week had started. This raised eyebrows, but he apologized publically and noted that he was the only one who had that information and that he wasn’t allowed to play on DraftKings, anyway. Ok, while it raised questions as to what sensitive information was accessible by employees and when, no harm no foul. The “scandal” really exploded, though, when it was found out that Haskell had not only entered an equivalent contest on FanDuel, but had placed second for $350,000. Further review of his results showed that he had significant success in baseball contests in FanDuel over the past year, as well. Thus, it was thought that Haskell had, indeed, used information not available to the public to give him an edge in DFS contests.
Of course, things have gone bananas since all this happened. The mainstream media has picked up on it, questioning whether or not DFS is on the up and up, some states plus the FBI and Department of Justice have begun probes into the legality of DFS, Nevada has declared DFS gambling and now requires sites to have licenses to operate, StarsDraft has exited the U.S. market almost entirely…the list goes on.
Not long after the firestorm erupted, DraftKings came out with a statement, saying it conducted its own internal investigation and found that Haskell did not receive the player usage information until after his roster was locked (unable to be changed) on FanDuel. Naturally, that wasn’t going to satisfy the public, so DraftKings hired Greenberg Traurig to conduct an independent investigation, led by former U.S. Attorney for the District of Massachusetts, John Pappalardo.
The Summary of Findings listed out the methodology that the law firm used in its investigation:
1) Met and interviewed all senior management concerning the allegation that was reported in the media that Ethan Haskell, a DraftKings employee, was in possession of non-public information which could have been used to prepare and submit a lineup with FanDuel that won him $350K.
2) Reviewed all documentation generated by the DraftKings internal inquiry and discussed the findings and analysis.
3) Initiated a comprehensive and totally independent investigation of the allegation.
4) Prepared an investigative plan to identify relevant individuals, electronic data and documents and relevant systems and applicable policies and procedures.
5) Secured complete access to individuals, documents and systems at the Company and identified sources of information outside the company.
6) Conducted comprehensive interviews of various individuals within the Company possessing relevant information, and certain individuals were interviewed multiple times as facts developed.
7) All documents relevant to the investigation were reviewed, authenticated and considered. These include email correspondence, posts, computer generated data, electronic entries, etc. GT requested and received documentation from sources outside the Company.
Papparlardo and his team found that Haskell’s lineup for the FanDuel $5M NFL Sunday Million was submitted at 3:28am on September 27th. The contest began at 1:00pm that day, at which point all lineups were locked and could not be changed, even though not all NFL games had started yet (some contests on some sites allow players to be swapped in and out of lineups if their team’s games have yet to begin, but apparently this is not the case with this specific contest).
It was not until 1:40pm that Haskell received an Excel file with the player usage information for the DraftKings Millionaire Maker contest. That information included ownership percentages of players involved in later games that had not started yet and was not available to the public at that point. As already known, Haskell won second place in the FanDuel contest.
Thus, Greenberg Traurig concluded that Haskell could not have engaged in “insider trading,” as he didn’t have the information before his contest started.
In the memo, DraftKings, not known lately for being too mindful of optics, rejoiced in its vindication (emphasis DraftKings’):
GT has received complete cooperation from the Company at every turn, and has been given unfettered access to all documents, systems, and individuals. GT’s independent investigation has confirmed that the Company’s initial findings were correct, and that the allegations that Mr. Haskell gained an unfair advantage in the $5M NFL Sunday Million contest due to his possession of the Company’s non-public information are without merit. GT’s independent investigation has concluded that it was impossible for Mr. Haskell to have gained such an advantage in the FanDuel contest in which he won a prize because he received the non-public information forty minutes after the deadline for submitting his lineup in the FanDuel contest.