According to the press release, 500.com issued materially false and misleading statements to investors by failing to disclose the risk of provincial sports lottery administration centers voluntarily suspending the acceptance of online purchase orders for lottery products. On May 7, 2014, Jinghua Daily published an article revealing that the China Welfare Lottery Administration Center and CSLAC both said that they have never authorized any website or agency to conduct online lottery sales to date and all online lottery sales are illegal. On this news, shares of 500.com fell $5.07 per share or over 15% from its previous closing price to close at $28.61 per share on May 7, 2015. On January 17, 2015, Sina.com published an article reporting that the certain Chinese governmental authorities issued a notice requiring provincial agencies to conduct self inspection with regards to unauthorized online lottery sales. On this news, shares of 500.com fell $0.60 per share from its previous closing price to close at $17.52 per share on January 20, 2015, further damaging investors. On February 25, 2015, 500.com announced that certain provincial sports lottery administration centers to which the Company provides sport lottery sales services plan to temporarily suspend accepting online purchase orders for lottery products, in response to a notice issued by governmental authorities. On this news, shares of 500.com fell $2.87 per share or over 22% to close at $9.96 per share on February 25, 2015, further damaging investors.
On September 12, 2016, the parties entered into a Stipulation of Settlement. This Settlement was preliminarily approved on November 1.