Lottery.com chair “forced out”, says chief compliance officer faces FBI investigation

In a resignation letter to the remaining Lottery.com board, Kivel said that emergency funding from Woodford Eurasia had not arrived, with no sign of it forthcoming, and that the chief compliance officer of the business was under FBI investigation.

Kivel had been a member of the Lottery.com board since November of 2021 and remained with the lottery broker and information portal amid ongoing issues within the business that led other board members to resign in September.

Writing in his resignation letter, Kivel said since these departures, “dozens of events”, some of which he listed in the letter, have made it “impossible to continue perform his duties as an independent director”.

Kivel highlighted an agreement with Woodford Eurasia Assets in particular which, reached in early September, he said appeared to be an exciting opportunity for the group to reinvent itself and retain staff.

This arrangement provided a $2.5m (£2.2m/€2.5m) investment to Lottery.com, followed by an $8.5m loan against monies owed by financial services firm J Streicher and an additional investment of up to $50.0m. However, Kivel said that to date “not a single penny of this promised investment has arrived while Woodford has not been able to demonstrate proof of funds”.

“Members of the Woodford Eurasia Assets organisation, including Nasib Piriyev, a partner at PNN-Group which controls Woodford and other entities, have made false and misleading promises to the company and statements to third parties which have created disruption within the business and loss of critical staff,” Kivel said.

According to Kivel, Lottery.com has so far spent more than $400,000 in legal fees to secure the $16.5m owed by J Streicher. Lottery.com prevailed in a summary judgment hearing in September, after which J Streicher was found in contempt for not satisfying its obligation as ordered by the court.

However, Kivel said he was made aware that Lottery.com interim CEO Sohail Quraeshi had been negotiating behind the scenes with J Streicher, without board approval or knowledge of its legal counsel. Kivel said this had a negative impact on the group’s ability to collect the monies owed.

Compliance officer under FBI investigation

Kivel also noted how Dennis Ruggeri, who was appointed as the chief compliance officer of Lottery.com by Quraeshi, is currently under investigation by the FBI. This, Kivel said, demonstrates a “clear lack of good judgment” by Quraeshi, who was aware of this and did not disclose the information to the board prior to the appointment.

He went on to say he learned these investors and related parties are aligning themselves with Ryan Dickinson, the former chief financial officer of Lottery.com who was terminated by the board in July.

Kivel also said he had been made aware that Matthew McGahan, who joined the board as an independent director last month, had been working with Piriyev and Andrey Ryienko, also of PNN Group, as well as Quraeshi and ex-Lottery.com chief revenue officer Matt Clemenson to set up a new business involving the Sports.com asset.

Separately, Kivel said the group had been setting up a NewCo in Dubai involving offshore accounts, ownership of intellectual property and an independent board. 

“These are significant events that were never discussed or approved by the board and none of these parties have the authority to perform such material acts,” Kivel said.

Finally, McGahan, who was chosen to join the board by PNN-Group, Woodford and Piriyev, has now taken complete control of the board. Kivel claimed he had been forced out as chair and learned that McGahan intends to appoint two individuals he said are not suitable and are conflicted, thereby stacking the board in the new investors’ interest.

“The actions of Mr McGahan and Mr Quraeshi have put this company in serious jeopardy and have caused the loss of important partners and top employees,” Kivel said. “The inactions and broken promises of the investment groups led by Nasib Piriyev have further damaged the company and hindered its ability to perform and recover.

“In summary, my efforts to perform as a fiduciary and support the Lottery.com turnaround have been aggressively obstructed by those aligned with the investor and investment groups mentioned above. I see no path to perform my responsibilities and must resign.”

Long downfall for Lottery.com

Kivel’s resignation marks the latest phase in what has become a dark period for Lottery.com.

Last week, the group appointed Yusufali & Associates LLC as its new independent auditing firm following the resignation of Armanino LLP. The portal will now work with Yusufali & Associates, which will perform quarterly financial reviews and annual audits.

Much of the group’s troubles stemmed from the fact that – after sacking its president and CFO after discovering instances of non-compliance with state and federal laws – Lottery.com discovered that the company’s cash holdings were overstated by $30m.

The group faced more struggles as it said that it was not able to pay employee wages and admitted in an SEC filing that as of 29 July 2022 it owed $425,000 in outstanding pay.

In an attempt to improve its situation, the company recently attempted to obtain funding from Woodford Eurasia, a subsidiary of investment firm United International Holdings Netherlands BV. 

This investor demanded that four of the five remaining members of the Lottery.com board resign as part of the terms of the loan. This led to two board members quitting in protest after claiming the company deliberately “thwarted” attempts to look into “red flags” raised regarding the new investor.

It was amid this turmoil that Armanino resigned as auditors.