FantasyAces files for Chapter 7 bankruptcy after deal with FantasyDraft falls through.
What a difference a few days make. Less than a week after FantasyDraft announced that it was acquiring the assets of FantasyAces, they revealed on Tuesday that they were unable to purchase the assets of Fantasy Aces. Less than 48 hours later, FantasyAces filed Chapter 7 bankruptcy, citing a failure to secure financing.
Unlike previous failures of small DFS sites, it appears as though FantasyAces will not be bailed out.
What Led to FantasyAces Bankruptcy?
Over the last couple weeks, there had been chatter about slow payments at FantasyAces. Then one week ago, FantasyAces halted trading on their stock pending an announcement. This was followed by an announcement from competitor FantasyDraft that it would be acquiring the assets of FantasyAces. That deal was not in place for long and on Monday, FantasyDraft released a statement saying that the deal had fallen apart.
“Unfortunately, because of issues identified during our due diligence, we are unable to purchase the assets of Fantasy Aces. We will continue to provide the best possible daily fantasy experience for our users, and are committed as always to putting our Players First.”
Shortly after, the Fantasy Sports Trade Authority announced that it had suspended FantasyAces membership.
The FantasyAces backruptcy filing came to light on Tuesday night. In the filing, the company declared that they had almost $3 million in liabilities with only $118.52 in operating funds and about $3,400 in player balances remaining. Among the liabilities is estimated to be around $1.3 million in player balances.
FantasyAces emailed a statement to players on Wednesday:
The FantasyAces team truly regrets to announce that we are unable to sustain our site and business operations effective January 31st 2017, filing for protection under Chapter 7 bankruptcy law. After spending over a year attempting to secure long term capital, including recent negotiations with two notable companies which subsequently failed to close, we are left with an unresolvable financial burden and have spent every waking minute attempting to find a solution for our players most importantly. We have unfortunately exhausted every possible financial option with no success. We fought as hard as we could, in the end without a major infusion or acquisition we just were not able to make it. Our site is temporarily shuttered and all accounts are on hold during this time while we work with the bankruptcy court in finding the fastest possible solution for our players.
What This Means for Players
Obviously, the developments over the last two days is terrible news for FantasyAces players. Players will very likely lose their funds as a result of the bankruptcy. According to the filing, there is very little remaining om player balances. Given the extent of FantasyAces’ liabilities, it suggests there will likely be nothing left for players after the process plays itself out. In theory, an 11th hour rescue could happen, but seems unlikely given the FantasyAces statement that was released on Tuesday.
What can players do? One Rotogrinders poster suggested that players make complaints to their state attorney general office and organize as a group with other players.
OPR also noted that FantasyAces is under the regulatory schemes of five states that have regulated DFS. They are advised to contact regulators to see what recourse they have, if any.
New York: 518-388-3300; [email protected]
Mississippi: [email protected]
Tennessee: 615-253-6658; [email protected]
Maryland: 410-260-4055; [email protected].
What This Means for the Industry
The loss of FantasyAces balances will likely be viewed as a scar on the industry as a whole. Not only will players be out their hard-earned money at FantasyAces, but the money also disappears from the pool of money for players who were enjoying daily fantasy sports in general.
The financial stability of other DFS sites is also being called into question by some regardless of how safe and secure the sites may be. The practice of using player funds for operations plagued the early online poker industry; a guilt-by-association perception could be applied to the DFS industry as well.
While some DFS sites have had financial issues in the past, many were eventually bailed out by competitors. For example, during 2016 two notable bailouts occurred. In early 2016, the iTeam Network bailed out FantasyUp while FantasyHub was later rescued by DraftKings. It looks as though there is no such suitor for FantasyAces after FantasyDraft backed out of the deal.
Even though smaller DFS sites have encountered major difficulties during DFS’s growth slowdown, the larger sites are seen as much safer. This is especially true now that states are regulating DFS and requiring that funds be segregated as part of those regulations. FanDuel, DraftKings and Yahoo Daily Fantasy also have huge financial backing (FanDuel and DraftKings from sports leagues and YDF from Yahoo).