In RE Lottery.com, Inc. Securities Litigation

Background

Preston Million filed the action on behalf of himself and others similarly situated against Lottery.com Inc. and individual defendants Anthony DiMatteo, Matthew Clemenson, and Ryan Dickinson. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. According to the complaint, after Lottery.com’s predecessor entered into an agreement with AutoLotto, Inc. under which Lottery.com would become publicly traded, the defendants issued public filings that allegedly contained materially misleading information about Lottery.com’s financial condition. The complaint further alleges that statements issued in July 2022 revealed legal and accounting problems, significant issues with the company’s financial statements, and insufficient resources to operate without furloughing employees. The company’s stock price allegedly fell after those statements.

Motions for Lead Plaintiff and Counsel

The Lottery.com Securities Group—Preston Million, Tim Weisheipl, Stephan de Bernede, Connor Hitt, and Solutions Tabarnapp Inc.—moved to be appointed lead plaintiffs and asked the court to approve Berger Montague and Kirby McInerney as co-lead counsel. RTD Bros LLC, Todd Benn, Tom Benn, and Tomasz Rzedzian, called the Lottery Investor Group, separately moved to be appointed lead plaintiffs and asked the court to approve Glancy Prongay & Murray LLP as lead counsel. The Lottery.com Securities Group later stated that it did not oppose the Lottery Investor Group’s motion because the Investor Group had the largest financial interest among the movants. The Investor Group’s motion was also unopposed by the deadline for opposition.

Lead Plaintiff Analysis

The Private Securities Litigation Reform Act requires the court to appoint the class member or group most capable of adequately representing the class. The statute creates a presumption in favor of the movant with the largest financial interest that also satisfies the relevant requirements of Rule 23 of the Federal Rules of Civil Procedure. The court must apply these requirements even when a motion is unopposed.

The court found that the Lottery Investor Group timely filed its motion. It alleged total losses of $8,554,826.37, compared with the Lottery.com Securities Group’s alleged losses of $1,835,188. The court treated the Investor Group’s larger alleged loss as the most important factor in determining which group had the largest financial interest.

The court also found that the Investor Group made the preliminary showing required under Rule 23. Its claims were considered typical because, like the other proposed class members, the group alleged that the defendants’ material misstatements and omissions about Lottery.com’s business, operations, and financial prospects violated federal securities laws. The court found the group adequate because its proposed counsel had substantial securities-class-action experience, the group had a strong financial interest in the outcome, and no competing party identified a conflict or unique defense that would prevent adequate representation.

The court further concluded that the group members could work together effectively. Several members had familial or business connections, they had discussed the motion and their responsibilities with one another and counsel, and they had developed a communication protocol. The court also noted that RTD Bros LLC’s agent, Hutchin Stone, was an experienced investor. No proof rebutted the presumption that the Investor Group was capable of fairly and adequately protecting the class’s interests.

Lead Counsel

The court approved the Investor Group’s selection of Glancy Prongay & Murray LLP as lead counsel. The court found that the firm had ample experience representing investors in securities class actions and noted that another court had previously found that the firm could adequately serve as lead counsel.

Disposition

Judge Jennifer L. Rochon granted the Lottery Investor Group’s unopposed motion and denied the Lottery.com Securities Group’s motion. The Clerk of Court was directed to terminate the motions listed at ECF Nos. 26 and 27.