Paysafe is being sued for alleged securities fraud. Several law firms have come forward to support a lawsuit for investors against the company. Paysafe has been a regular payments platform provider for the gaming industry and went public earlier this year.
Paysafe Not So Safe
Several law firms are in on the action, but it was Glancy Prongay & Murray LLP who filed the suit against Paysafe in the US District Court for Southern District of New York on December 10. Wiley v. Paysafe Limited, et al accuses the company of making “materially falsified and/or misleading statements” and failing to disclose “material adverse facts about the company’s business, operations, and prospects.”
Also getting in on the suit are the law firms Robbins Geller Rudman & Dowd LLP, Bragar Eagel & Squire, P.C. and Kirby McInerney LLP.
Paysafe was accused of failing to notify investors about the negative effects of gambling regulations in key European countries, its performance problems in its Digital Wallet segment, and the fact that new eCommerce agreements were being renegotiated.
The lawsuit subsequently claims that Paysafe’s positive statements regarding its operations and future prospects were “materially misleading and/or lacked a reasonable base.”
Paysafe Forced Into a Corner
Paysafe went public on March 30 when it joined with special purpose acquisition company (SPAC) FTAC. On November 11, Paysafe revised its revenue guidance for the entire year to $1.47-$1.48 billion, a decrease of around $700 million.
Paysafe explained that the changes were a result of “gambling regulations, softness in key European market and performance challenges impacting Digital Wallet segment,” as well as “the modified scope of new ecommerce customers agreements relative to company’s initial expectations for these agreements.”
Paysafe’s share price dropped by over 40% on the same day to $4.24 at the time the markets closed.
The law firm has accused Paysafe of violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. It has said that any qualified investor who wants to participate now has 60 days to speak up, which gives them until February 8 to respond.
Only those who purchased or acquired a stake in the company from December 7, 2020, to November 10, 2021, could potentially be eligible.
As of this morning, Paysafe hasn’t offered a published response.