By Paulina Duran
SYDNEY (Reuters) - Australian casino operator Crown Resorts Ltd (AX:CWN) was slapped with a class action lawsuit on Monday for allegedly failing to inform shareholders of a marketing campaign in China that resulted in staff arrests and a slump in the share price.
The company part-owned by billionaire businessman James Packer said it would defend itself against the allegations contained in the suit, filed on behalf of shareholders who invested between Feb. 6, 2015 and Oct. 16, 2016.
On Oct. 17, 2016, Crown shares fell almost 14 percent on the news that almost 20 employees had been arrested in China for marketing gambling trips to Macau. While gambling is legal in the southern Chinese territory, it is illegal on the mainland.
"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," Andrew Watson, national head of class actions at Maurice Blackburn, said in a statement.
The arrests triggered an abrupt reversal in Crown's offshore ambitions and an admission from Packer that his "global strategy" had failed. Australia's biggest casino company quit Macau and Las Vegas to focus on Australia.
Trading volumes at Crown resorts have slumped in the fall-out of the arrests, as profits generated from high rollers plummeted.
All of the Crown employees who were detained in China have now been released.
Crown said in a statement it would "vigorously defend" itself against the shareholders' allegations.
Crown shares fell as much as 1.2 percent in midday trading on Monday while the benchmark index edged higher.