A New York law firm joined the Earth vs. Starnet battle in mid October by filing a class-action lawsuit against the Antigua-based gambling software supplier claiming that it misled investors. IGN has obtained a copy of the suit, which was filed in the United States District Court District of Delaware.
In a nutshell, the plaintiff alleges that Starnet knowingly made false statements in press releases and SEC forms (10-K and 10-Q) that caused its stock prices to inflate. Several Starnet officers are accused of concealing material adverse information. Specifically, the plaintiff alleges that the company informed stockholders that it Starnet Web sites did not accept wagers from North Americans even though, in reality, it did. It also alleges that the company knowingly performed illegal activities by using designated back-up servers located in Canada.
According to the plaintiff, the information allegedly withheld by Starnet would have informed share holders that the company's legal status was shaky and thus would have forewarned stockholders of the RCMP raid on March 11 which caused the company's stock to plummet by 77 percent. Making matters worse for Starnet, the plaintiff points to heavy amounts of insider trading by the defendants prior to the raid.
Starnet has thus far declined to comment on the lawsuit. Recently appointed CEO Meldon Ellis says the company has not been served yet with the suit and won't comment until it has, citing in a recent conference call, "… There's no legal obligation of a named defendant until that named defendant is served. Our obligations begin once we're served with the lawsuit."
View the a copy of the suit.