The CEO of Stockholm-listed gambling operator Cherry AB, Anders Holmgren, has been investigated by Sweden’s Economic Crime Authority (ECA) on insider trading suspicion, the company itself confirmed in a Tuesday statement.
The ECA searched Cherry’s head office on Tuesday in relation to its investigation. The gambling company also confirmed that Mr. Holmgren was arrested. Gunnar Lind, Chairman of Cherry’s Audit Committee, was appointed Interim CEO while the investigation continues.
According to reports by local media outlets, the investigation was launched after Mr. Holmgren purchased late in March SEK12 million worth of shares in the company. He is probed for insider trading and gross executive misconduct and if the suspicions prove true, he could be sentenced to between six months and six years in prison, depending on the scope of his alleged violations.
Mr. Holmgren was appointed as Acting Chief Executive and President of Cherry in January 2017 after the unexpected departure of the company’s then CEO Fredrik Burvall who cited “family reasons” for his decision to step down. Mr. Holmgren was promoted to assume full leadership duties as CEO of the gambling company this past February. It is important to note that Cherry’s top executive was one of the founders of Betsson, another major gambling company hailing from Sweden. Mr. Holmgren acted as CEO of that company in the period between 2000-2011.
Following what turned out to be a burdensome integration of the ComeOn business, Cherry announced in its trading statement for the third quarter of 2017 that it was lowering its full-year revenue projections from SEK2.5 billion to SEK2.2 billion and its earnings projections from SEK480 million to SEK400 million.
In April 2018, Cherry issued a reverse profit warning, telling investors and analysts that it has actually beaten expectations for the year ended December 31, 2017. As mentioned above, Mr. Holmgren purchased stock in Cherry in late March worth around SEK12 million. It is believed that the ECA investigation was the result of that purchase and the reverse profit warning that was issued shortly after.
Cherry said Tuesday that it would cooperate fully during the investigation and would release any relevant information in due course. The ECA confirmed the investigation and said that it was related to insider trading and gross executive violations, but refused to provide additional details at this point as any such move could affect the ongoing probe.
While Cherry’s statement did confirm that the investigation was related to Mr. Holmgren purchasing shares in the company, it did not specify whether the purchase at the end of March was the one to have brought the executive to the ECA’s attention.
Mr. Holmgren has not been the only high-profile gambling executive to be investigated over insider trading allegations in recent years. David Baazov, the former CEO of The Stars Group (re-branded from Amaya), was probed by Québec’s securities regulator on suspicion that he had shared confidential company information about the purchase of PokerStars in 2014. His trial began in April or two years after the regulatory body launched its probe.
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