The developer issued a ruling against Cloud9 on their website, stating the esports organisation issued equity through restricted stock units (RSU) to seven players over the course of 16 months. They also failed to notify Riot of the payments.
This breaks a rule implemented in 2017 whereby LCS team owners are prohibited from ‘acting as players’ and prevents active players from owning equity within their team.
In June 2019, the League became aware several teams had signed contract extensions which were not properly submitted to them. Cloud9 submitted 10 documents as follow-up, “including contract amendments, summary sheets, and documents labeled as RSUs for several players.”
According to Riot, none of the documents showed the RSU grants. Cloud9 submitted additional RSU documents in July, but due to a ‘clerical error’ Riot didn’t notice the discrepancy.
Riot launched an investigation into Cloud9 players in August after it was highlighted to them, finding there was a “generalized belief by players and their representatives that the RSUs were permissible because they did not believe they would be offered equity if it was against the rules.” Others claimed they thought they were allowed because other recipients had received them.
As a result, Riot fined Cloud9 $25,000 per player, coming to a total of $175,000. The organisation have also been ordered to ‘pay certain amounts to players no longer on Cloud9’s roster in an aggregate cash that compensates those players at prevailing fair market value’.
Overall, Cloud9’s fines could range between $330,000 to $605,000.
The players believed to have received the restricted stock units were Cloud9’s summer line-up, Eric “Licorice” Ritchie, Dennis “Svenskeren” Johnsen, Robert “Blaber” Huang, Zachary “Sneaky” Scuderi, and Tristan “Zeyzal” Stidam. Former players Nicolai “Jensen” Jensen and Andy “Smoothie” Ta are also believed to have received RSU’s during their time with the team.
Ginx TV has reached out to Cloud9 for comment.