The friction between Grant Johnson, the ousted CEO of Esports Entertainment Group (EEG), and the company he once led is getting hotter. Following his “voluntary” exit in December, Johnson is now suing EEG for millions.
Johnson claims breach of contract on the part of EEG. He submitted the suit in the US District Court for the Southern District of New York, seeking damages of up to $3 million, according to court documents.
The lawsuit alleges the company’s termination of Johnson’s employment contract was based on “contrived reasons” that fail to meet the requirements of a “for cause” termination. Johnson also asserts that EEG failed to pay his salary, bonuses, and severance pay as agreed in the contract.
More Fluff than Stuff
Johnson’s contract with EEG abruptly ended on Dec. 3, 2022. At the time, the company accused him of “fraud, willful misconduct, and/or gross negligence,” according to his termination letter. The self-described entrepreneur and financial services expert argues that EEG used that terminology in an effort to force him to resign.
In Johnson’s view, there were three main reasons he ultimately had to turn to a lawsuit to seek restitution. One was the fact that EEG didn’t provide 60 days’ notice. Another was that the allegations of “for cause” weren’t supported by evidence, and the third is that the allegations were false.
As for the latter reason, Johnson claims that the board of directors of EEG already addressed and dismissed the allegations. It unanimously agreed not to conduct an investigation into them in April of last year.
Johnson stated in the suit that he has incurred losses, which include a cash bonus of $450K, per his contract. They also include $1.15 million, the equivalent of 200K shares in EEG that his contract provided him.
EEG’s board of directors asked Johnson to resign last month following a slow 2022, for which it blamed the then-CEO. In the fourth quarter, it posted an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $6.5 million.
Johnson has also stated that, even if there had been indications of fraud, these don’t meet the threshold for dismissal, per his employment contract. EEG refutes this, as well as his other allegations.
This month, the board hired Spectrum Gaming Group’s Alex Igelman, the founder of eSports consultancy firm Esports Capital Group, to take over. Igelman is also the cofounder of FairP2P, a “membership-based self-regulatory organization focused on the oversight and governance of the monetized competitive peer-to-peer (P2P) skill-based gameplay,” according to the company’s description.
Complete Rewrite of Company Operations
The weak performance led EEG to close up eSports online betting platform Vie.gg. It also had to sell its online casino operations in Spain, as well as close Argyll iGaming in the UK and Ireland.
As of the middle of January, the company continues to conduct damage control and put everything in order. It reportedly had only $500K in cash and owed $200K to customers at the end of 2022.
The good news is that there will be some money coming in soon. The sale of its gaming assets in Spain should conclude this month. If it does, it will deliver $1 million to the company. There’s an additional $1 million the country’s Directorate General for the Regulation of Gambling holds on deposit.
Wherever possible, EEG will use additional proceeds to pay off other debts. It defaulted on a loan last October, and it needs to close that gap to stay above water. If it isn’t able to complete the asset sale in Spain, the company’s future will be uncertain.
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