A former DraftKings executive now working for Fanatics is the subject of an explosive lawsuit filed late Monday.
The suit revolves around the alleged actions of Michael Hermalyn, who served as Senior Vice President of Business Development and Vice President of VIP Management at DraftKings from 2020 to early-2024. It says he “hatched a secret plan over the past year to steal and use confidential information, solicit customers and employees and join a key competitor.”
Among other forms of restitution, DraftKings is seeking a temporary restraining order against Hermalyn, the return of confidential information, and a jury trial that could determine actual and compensatory damages.
The case against Hermalyn
Lawyers for DraftKings allege Hermalyn’s scheme dates back to last year’s Super Bowl. The filing states he secretly met with Fanatics CEO Michael Rubin and his team to discuss employment, and followed that up by encouraging his subordinates to do the same.
In addition, Hermalyn allegedly claimed to be mourning the loss of a friend last week. During that time, the lawsuit claims he “secretly traveled to Fanatics offices in Los Angeles, negotiated an employment agreement with Fanatics, downloaded DraftKings’ confidential business plans for the Super Bowl while sitting in Fanatics’ offices, and fraudulently attempted to establish California residency during his 48-hour visit so he could resign from DraftKings and try to invalidate his non-compete agreements in California state court only a few days later.”
While at DraftKings, Hermalyn was responsible for the company’s VIP acquisition and retention efforts. Because of his role, the suit says Hermalyn’s intimate familiarity with the company’s most significant customers allowed DraftKings to attract and retain those users.
The lawsuit also mentions an internal investigation focusing on workplace misconduct. Those accusations included ones of theft of company funds, inappropriate behavior towards women, and bullying.
According to legal documents, Hermalyn’s compensation and title were both reduced in late-January, and Hermalyn stated his desire was to move forward with the company. DraftKings says that investigation is ongoing.
Why does the timing matter?
Hermalyn resigned from DraftKings on Thursday, Feb. 1, less than two weeks before Super Bowl 58. Super Bowl betting is one of the biggest attractions of the year across online sportsbooks. That doesn’t go ignored in the lawsuit, which includes the following statement:
“Without prompt injunctive relief barring Hermalyn from violating his agreements with DraftKings, Hermalyn will be free to launch an unlawful and targeted attack against DraftKings’ business and divert its most valuable customers immediately prior to one of the most business critical weekends for DraftKings. Customer loyalty is one of the most important competitive edges in the gaming industry. Hermalyn knows DraftKings’ playbook on how to engage and retain VIP clients.”
The lawsuit further states that, while Hermalyn claimed he was in Pennsylvania, geolocation data and access account records show he was in California. During that time, DraftKings says he accessed and downloaded sensitive records, including some documents pertaining to contacts attending Super Bowl 58 in Las Vegas this weekend. According to the court filings, only 21 DraftKings employees would have had access to one particular spreadsheet.
“Hermalyn had no legitimate business reason to download the … spreadsheet to a non-DraftKings device, especially because he knew that he would no longer be employed by DraftKings by the Super Bowl,” the filings read. “On information and belief, Hermalyn downloaded DraftKings’ sensitive Super Bowl strategies in order to share the information with Fanatics, with which he was actively negotiating the terms of his future employment.”
The response from Fanatics
Fanatics issued a statement through a spokesperson that called the lawsuit “sour grapes.” The statement reads, in part:
“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, meanwhile, is suing DraftKings over a non-compete clause he claims is overly restrictive. He says he’s relocated to California, where such a clause would be unenforceable.
