Legal threat closes Purple Lounge

Media Corp has “temporarily suspended” online casino site Purple Lounge amid a potentially financially ruinous legal claim and in an attempt to stem losses from the ailing brand.

The online media business has blamed “negative press” and a five year-old legal claim for the Microgaming-powered site’s downturn in fortunes, adding that its shortfall is likely to lead to an overall loss for the company. It has yet to announce plans to repay player balances.

The negative publicity garnered by Purple Lounge has been blamed on a legal case brought against Search Focus Limited ““ a subsidiary of Media Corp ““ by CD Casino.com in February this year. The finite details of the case remain unclear, however CD Casino submitted a claim on February 15 this year for “in excess of £300,000″ relating to “an agreement dating back to February 2007″, according to Stockmarketwire.com. The only known director of CD Casino is named as a Michael Caselli, publisher and editor-in-chief of industry magazine iGaming Business. eGR has attempted to contact Caselli, however he is currently travelling.

In February this year Media Corp made the following statement: “The board has taken legal advice and considers the claim to be spurious and without foundation and will defend it vigorously. Media Corporation has filed acknowledgement of service of the claim confirming that it shall be defending these matters,” the statement said.

In a trading update ahead of the company’s interim financial results announcement for the six months ending 31 March 2012, Media Corp revealed it had “not received dividends or cash payments” from Purple Lounge since acquiring the business in September 2009. During this time the company claims to have loaned over £0.9m to the division.

The temporary shutdown follows the announcement earlier this month that Media Corp’s online joint venture with Hippodrome Casino, which will see the company provide online casino and poker products, has been delayed after the opening of the land-based casino was delayed. Originally set to launch on April 1, the JV will now begin “as and when” the Hippodrome opens.

A few weeks later, Media Corp announced that trading in its shares on the Alternative Investment Market (AIM) had been temporarily suspended as the company was in “advanced discussions” regarding a reverse takeover of Gaming Media Group, owners of the Poker Channel. However, a source from GMG told eGR that they are “just at the start of the process” and though Purple Lounge “was not really of concern,” Media Corp’s losses were an issue.

After Media Corp reported a 46% rise in revenues for the year ending 30 September 2011, it announced the sale of its loss-making publishing assets earlier in April, selling domains Onthebox.com and Forexspace for £250,000 ““ making the company a profit of £120,000, as it valued the domains at £130,000. This will be added to the company’s cash balance, which stood at £400,000 as of 31 March 2012.