Crown Resorts Pays $125M To Settle Class Action Lawsuit

Crown Resorts pays $125 million to settle a class action lawsuit brought against it regarding $1.3 billion of lost shareholder value.

Australian casino giant Crown Resorts has paid $125 million to settle a class action lawsuit brought against it. The class action lawsuit relates to the arrest of Crown workers in China in October 2016, which ultimately resulted in a 14% drop in Crown’s share price.

Maurice Blackburn Lawyers filed the class action lawsuit on December 4, 2017. They did this on behalf of shareholders who invested in Crown between February 6, 2015 and October 16, 2016. The plaintiffs sought compensation after the arrests in China of Crown employees wiped almost $1.3 billion off the value of Crown Resorts Limited.

Andrew Watson, Maurice Blackburn’s Head of Class Action, said at the time that Crown gambled with the Chinese government’s warnings. Furthermore, he stated Crown had a duty to protect its revenue streams.

“Shareholders should have been apprised of the risks that Crown was taking in China and the threat they posed to the company’s revenue streams.”

Crown Issues Class Action Settlement Statement

“Crown Resorts Limited announced today that it has reached an agreement to settle the shareholder class action commenced against it on 4 December 2017 in the Federal Court of Australia, referenced as Zantran Pt Limited v Crown Resorts Limited, Federal Court Proceeding VID 1317/2017.

The total settlement amount is $125 million inclusive of interest and costs.

The Settlement of the Proceeding, which is without admission of liability, is subject to Federal Court approval and other conditions.

Crown expects to recover a significant portion of the settlement amount from its insurers but cannot at this stage be certain about the outcome of negotiations with insurers, or the outcome of any necessary formal steps for recovery it may need to take.

Crown’s Board of Directors determined that the agreement to settle the Proceeding was a commercial decision made in the best interests of Crown and its shareholders.”

What Was The China Saga?

The China saga happened in October 2016, way before the recent royal commission into Crown’s affairs. Chinese authorities arrested 19 Crown staff and charged them with breaking Chinese gambling laws. Sixteen of those 19 arrested staff paid a combined fine of 8.62 million yuan ($1.67 million). In addition, some of those arrested spent time in jail, including Jenny Jiang who police locked up for four months.

Casino gambling and the promotion of gambling are banned in mainland China. Organising groups of more than ten Chinese nationals for gambling trips abroad is also illegal. Crown skirted Chinese laws by offering tour packages instead of gambling trips.

Law firm WilmerHale warned Crown about a Chinese crackdown on such activities in February 2015. It warned to avoid activities that could be viewed as attracting Chinese gamblers abroad. Crown took no notice.

In addition, Crown rented a semi-residential building from which its staff operated the “tour package” business. Furthermore, it instructed its staff to use codewords when conducting business with Chinese people.

The Last Of Negativity Surrounding Crown?

Settling this long-running class action lawsuit brings an end to the negativity surrounding Crown; or at least it should. Crown’s reputation lies in tatters after months of revelations about dodgy dealing and wrongdoing.

The company turned a blind eye to money laundering and some say actively encouraged it. They flouted every rule and regulation under the sun, including making their own rules up regarding pokies revenue, which resulted in a massive underpayment to the Victorian government.

October 26, 2021, saw the Victorian Government allow Crown to keep its casino gaming licence despite the company’s massive failings. The Honourable Ray Finkelstein led the royal commission into Crown Melbourne. Finkelstein deemed Crown Melbourne not a suitable person to continue to hold a casino licence.

However, Finkelstein praised the new Crown board for its dedication to change and reform. He is happy the new senior management team has the skills to turn around Crown. Settling the class action lawsuit kind of draws a line under the recent negativity and makes it possible for Crown to move on.