DraftKings has sued one of its former executives Michael Hermalyn in Massachusetts federal court, accusing him of stealing confidential business information and taking it to rival Fanatics.
In an explosive Monday court filing, DraftKings accuses its head of VIP operations of a yearlong plan to steal confidential information before he took it to upstart Fanatics Sportsbook.
The lawsuit comes days after Michael Hermalyn quit DraftKings and accepted a similar job at Fanatics overseeing VIP relationships for the Fanatics betting operation.
Hermalyn sued DraftKings last week, saying that his 12-month global noncompete was overly restrictive and unenforceable in California, where he said he is now living after relocating to work for Fanatics.
DraftKings alleges he not only stole and used confidential information, but the suit claims he made up lies about leaving the industry and mourning the loss of a friend. That was done to cover his tracks of meeting and eventually accepting employment in the same role with rival Fanatics.
An email from Hermalyn’s work account last month informed two DraftKings employees that a “close friend” had died and he would be taking two days off. Hermalyn lives in the New York area and makes trips to DraftKings’ headquarters in Boston, but geolocation data showed that at the time he was at Fanatics’ offices in Los Angeles, the lawsuit stated.
Hermalyn allegedly negotiated an employment contract with Fanatics and “downloaded DraftKings’ confidential business plans for the Super Bowl while sitting in Fanatics’ offices” while in Los Angeles.
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“Hermalyn knows DraftKings’ playbook on how to engage and retain VIP clients,” the complaint states. “On information and belief, Hermalyn, acting in concert with Fanatics, timed his departure and theft of confidential information to coincide with the critical days leading up to the Super Bowl to further a scheme to irreparably interfere with DraftKings’ customer and business relationships by pursuing those relationships at Fanatics using the confidential information and goodwill that he obtained at DraftKings.”
Hermalyn, the complaint alleges, “clandestinely” met with Fanatics CEO Michael Rubin and other executives at last year’s Super Bowl and later “improperly” encouraged his DraftKings co-workers to do the same.
According to the lawsuit, the internal probe into Hermalyn’s conduct began after “numerous female DraftKings employees” made the company aware of workplace misconduct. The allegations included that Hermalyn “engaged in unwelcome physical contact with a female employee without her consent” and “made inappropriate comments regarding his female colleague’s physical appearance.”
In response to the suit, a Fanatics spokesperson said in a statement: “This is just sour grapes. DraftKings is understandably upset that one of its employees left for the greener pastures at Fanatics. The fact that they are trying to drum up ridiculous allegations on one of their well-respected executives in an attempt to ruin his reputation sheds some light on why employees may be choosing to leave that organization.”
Hermalyn received “millions of dollars of compensation” from DraftKings as part of his agreement “not to use or disclose confidential DraftKings information” or compete against DraftKings, the lawsuit stated.
For the past few years, Hermalyn led DraftKings’ VIP team, a role in which he oversaw the acquisition and retention of the company’s highest-value players.
