North American esports organisation Cloud9 has been whacked with a $175K fine by the League of Legends Championship Series (LCS) for contract violations.
Apparently, the violations concerned the issuance of equity as compensation to seven players, with the organisation landing a $25K fine per player.
The fines were issued after an investigation by LCS staff found that in many cases, when players had signed contract extensions, the contract summary sheets had not been submitted to the league for review – something required under the rules. LCS game teams a week from 21st June to submit the correct documentation.
Unfortunately for Cloud9, it appears the documentation it submitted did not include the required information pertaining to amendments, RSU (Restricted Stock Units) grants and other agreements relating to the release, trade, termination or assignment of players. After a subsequent document sent to the league by Cloud9 did include RSU information, the league noticed the violations and started an investigation.
That investigation found general confusion among Cloud9 players and representatives, with most assuming the RSUs, which had been received either as a portion of contracts or gifts, were allowed because they didn’t think the organisation would offer it if it was prohibited.
In response, Cloud9 ownership says they didn’t know about the rule changes and blamed a breakdown of communication.
The organisation will now have to pay the $175K fine, and buy back the outstanding RSU it issued to former players, which means the total outlay could hit $605K.
Ona more cheerful note, just last week AYO.NEWS reported that Cloud9 had partnered with Danish travel gear brand Maika’I (read more), and last month we reported it had strengthened its relationship with sports brand Puma (read more).
AYO.NEWS says:
Ouch! It just goes to show how complicated things have become in what is now the big business world of professional esports. We’re sure Cloud9 will learn from the debacle and can manage to shell out for the fine and buyback, but still, it’s a big cost for a communication breakdown.
AYO.NEWS says features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited.
