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Cloud9 fined by Riot Games for violating LCS rules

North American organisation Cloud9 has been fined by Riot Games after it was found to have violated LCS rules.

According to Riot Games, Cloud9 issued equity through an “employee stock plan” to seven players over the course of 16 months.

Cloud LCS Fine
Photo credit: Riot Games

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Cloud9 didn’t notify Riot Games about what it had done and, as a result, is being fined $25,000 (£19,379.88) for each of the seven players involved. With the implementation of franchising in late 2017, a rule was added that prohibited a team owner from being on their team’s roster.

Riot Games states that it became aware in June this year that several teams had signed contract extensions with players without it being informed. To establish some clarity around the situation, it opened a week-long period in which teams could submit summary sheets; any penalty for lateness would be waived, according to the developer. Cloud9 provided documents on contract amendments, summary sheets, and restricted stock units – the latter should have been pointed out and escalated internally at Riot Games.

As part of Riot Games’ efforts to change the rules around ownership – which later resulted in Bjergsen becoming a part-owner in TSM – Cloud9’s restricted stock units grants were flagged. In either of the methods in which Cloud9 gave restricted stock units to players, it went against the official LCS rules. Notably, it was found that only two of the seven players involved had a lawyer.

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As a result of Cloud9 operating outside of the rules, there are penalties that go beyond the $25,000 (£19,379.88) fine per player, which amounts to $175,000 (£135,659.12), which is required to be paid in the next 30 days.

The organisation has been directed to pay players that are no longer on its roster in an aggregate cash amount as compensation. It also has to pay players that are still on its roster to cancel the restricted stock units grants or substitute for the grants through contract renegotiations.

The total fine for Cloud9, according to Riot Games, is approximately between $330,000 (£255,903.45) and $605,000 (£469,156.32), with the latter figure being the minimum that Riot Games expects to be paid out. The variation in the approximate figure is due to the contract renegotiations.

Esports Insider says: If organisations are operating outside of a clear ruleset in any way then they should be penalized, there’s no doubt about that in our minds. Whether it was simply ignorance on Cloud9’s behalf or a purposeful action, those behind the organisation will be kicking themselves for letting this happen. At least Cloud9 can afford it thanks to it $50 million (£38.8 million) raise last year, eh?

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