Evolution Triumphs in US Securities Fraud Case as Court Dismisses Investor Claims
Evolution’s Legal Victory in US Securities Case
Evolution AB, the prominent Swedish gaming company, has successfully concluded a major legal dispute in the United States. On September 5, 2023, the US District Court for the Eastern District of Pennsylvania ruled in favor of Evolution by dismissing a prolonged securities fraud lawsuit brought by investors. This decision brings to an end a lengthy and complex legal battle.
Subsidiaries Operate Autonomously, Court Finds
The lawsuit was initiated by investors holding unsponsored American Depository Receipts (ADRs) connected to Evolution’s shares on the Stockholm stock exchange. The plaintiffs accused the company and its leadership of misleading investors regarding its business expansion and compliance with regulations from 2019 through 2023. They further claimed that Evolution’s US-based subsidiaries acted as extensions of the parent company, thereby holding Evolution responsible under US securities laws.
Earlier rulings had already dismissed allegations against CEO Martin Carlesund and former CFO Jacob Kaplan, isolating the corporate entity as the sole defendant. Judge Mia Roberts Perez’s recent dismissal with prejudice means that these claims cannot be refiled. With the appeal window now closed, the case stands definitively resolved.
In her judgment, Judge Perez emphasized that Evolution upheld a strong corporate distinction from its US subsidiaries. The evidence presented did not demonstrate the level of control needed to disregard this separation. The subsidiaries managed their own day-to-day operations independently and dealt directly with customers, reflecting a standard parent-subsidiary relationship rather than an “alter ego” status.
Implications of the Ruling Regarding Legal Responsibility
The court highlighted that Evolution neither authorized nor was involved in the issuance of the unsponsored ADRs and thus bore no responsibility under US securities law. The existence of American subsidiaries alone was insufficient to hold Evolution accountable as a foreign parent company in this context.
Judge Perez stated clearly that Evolution does not exercise the necessary daily control to meet the “alter ego” criteria under the law.
Ongoing Legal Matters for Evolution
While this ruling resolves one legal matter, Evolution continues to face other significant cases. A notable ongoing dispute involves Light & Wonder in Nevada, where the federal court has mandated arbitration for claims related to trade secrets but allowed patent infringement cases to move forward independently. A status meeting on October 30 will provide further direction on managing these simultaneous proceedings.
Despite these ongoing challenges, the recent court decision represents a major win for Evolution. It effectively rebuffs accusations of misconduct from investors and serves as a landmark ruling that may deter similar legal claims in the future, bringing a degree of clarity amid a complex legal environment.
