On October 9, 2016, Team Argentina placed second in the Counter-Strike: Global Offensive World Championships, winning $20,000. But months later, they still haven’t seen the money, and other teams who competed and won prizes say they haven’t been paid either.
“The CS:GO Argentinian Team didn’t receive their payments yet, and we also never received our payments to work in the Spanish/Portuguese streaming channels,” Team Argentina’s captain, Martin Biolchi, told Compete.
Team Denmark, one of the teams in the shared third-fourth place, is reportedly waiting on their prize money as well. In late June of this year, Team Denmark player Casper “Cadian” Møller tweeted that he and his team still hadn’t received their winnings. Møller did not respond to a request for comment, nor did the Turkey and France teams, which placed first and third.
The competition’s $100,000 prize pool designated half its pool for the first place winners, $20,000 for second place, $10,000 for the third and fourth place teams, and $2,500 for the teams in 5th–8th place.
E-Frag, the organizers of the CS:GO World Championships, copped to the problem in a Twitlonger post in June about the sponsor for the tournament, a live-streaming esports site called Azubu. The company, founded in 2011, launched the same year that Justin.tv rebranded as Twitch, although Azubu has yet to match Twitch’s acclaim. Azubu recently acquired another video streaming site called Hitbox and now conducts business under the name Smashcast.TV.
According to E-Frag’s Twitter post, the winnings were “signed contractually to be paid by Azubu at the immediate end of the event,” but the sponsor has yet to pay out. E-Frag notes in the post that if Azubu does not provide the funds, E-Frag “will pay the pool through our own funds regardless,” but did not specify a timeline.
When asked about the status of the prize winnings, E-Frag told Compete: “We’re in the process of arbitration in the arbitration courts with Azubu. We’ve hired Faegre Baker Daniels who are doing the case for us.” Faegre Baker Daniels did not respond to repeated requests for comment.
E-Frag is not the only tournament organizer claiming to still be waiting on a check from Azubu. The Dota 2 Game On invitational tournament series, which had a much smaller prize pool of $2,000, still has outstanding debts from Azubu, according to the winners. The tournament took place around the same time period as the CS:GO World Championships, ending on October 7, 2016.
Matthias Deutschmann, team captain for the The Dota 2 Game On tournament’s winners Valkyrie eSports, told Compete that their $1,500 in first prize winnings has still not shown up. That may seem like small change to a bigger esports team, but for Valkyrie, it was a huge deal. In Deutschmann’s words: “We were mostly students back then and could use the money to get better gear.”
In early 2017, Deutschmann said he finally heard back from Kevin Jordan, Azubu’s Global Director of Partners and Monetization, who promised the money would arrive “soon.” (Jordan did not respond to a request for comment.) But “soon” turned out to be “later,” and reports about Azubu’s financial standing grew increasingly dire.
In January, the Los Angeles Times published a story about the “uncommon financing methods” of one of Azubu’s key investors, Lars Windhorst, and his history with “failed companies, personal bankruptcy and a guilty plea to charges in 2009 that he embezzled money from one of his firms.” South Korean daily newspaper The Kyunghyang Shinmun reported last December that Azubu’s other key investor, Dr. Kim Seok-ki, had been arrested “on suspicion of manipulation of stock prices.”
In May 2017, Azubu acquired a streaming service called Hitbox, then rebranded under a new name: Smashcast.TV. E-Frag made note of this acquisition in their Twitter statement about Azubu’s debts, writing that “Azubu has been telling us that they do not have funds [to pay out winnings] even though they recently purchased Hitbox for millions. Azubu denied buying Hitbox when our lawyers spoke to them.”
On July 7, 2017, Law360 reported that London’s High Court issued a worldwide freeze of Lars Windhorst’s assets due to an alleged $68.3 million in reneged deals. When asked for comment from Compete, however, Windhorst denied this report: “No assets of mine have been frozen and the case you are referring to has been settled a while ago. The financial position of [Windhorst’s investment company] Sapinda Holding B.V. is strong and most of the portfolio companies of the group which had difficulties last year have turned around positively.”
“I would be surprised if Azubu has not sufficient funds to pay its obligations,” Windhorst continued. “Azubu has recently received substantial funding.” Windhorst did not provide any clarification about the nature of this funding.
Mike McGarvey, the current CEO of Azubu, did elaborate further about the company’s debts in an emailed statement to Compete: “I can comment that Azubu’s previous management team made commitments to broadcasters and events far beyond the company’s means. We have worked to resolve over 90% of those obligations and have a few left to resolve which we plan to do.” McGarvey described his current role at Azubu, which now operates under the name Smashcast.TV, as “cleaning up most the obligations and purchasing Hitbox as well as the recent rebranding and relaunch.”
When asked about the prize winnings for the two tournaments in question, McGarvey said that he had only been the CEO of Azubu for “about 12 months.” He was Azubu’s CEO when these two tournaments wrapped up last October, but he told Compete that the sponsorship deals for these events had been struck by “the previous management team. I have not made one agreement since I arrived. The deals were very one-sided.”
Ian Sharpe, who served as CEO before McGarvey and during the time these deals were made, told Compete: “My executive team and I ran Azubu for three years, striving to set the goals delivered to us by the investors. We met those objectives despite a constant and serious lack of funding. The deals that we signed at the time we did in good faith, believing that we had significant investment from those investors. That turned out not to be true. Hence, the executive team decided to move on to other opportunities.” Sharpe left the company in August 2016. Mike McGarvey began working for Azubu in May 2016 according to the Los Angeles Times. He took on the CEO role after Sharpe’s departure.
McGarvey emphasized that Azubu-sponsored tournaments have made up a relatively small percentage of Azubu’s debts, and that many of the company’s debts stemmed from “agreements in place with broadcasters that essentially—poor business deals that had been done. The company got themselves in an unsustainable situation in terms of paying broadcasters... The company would not be able to continue if it was not renegotiating some of these deals,” he said. McGarvey estimated that 90% of these deals had been either renegotiated or terminated since “the middle to end of last year.”
As for the unpaid tournament winnings, McGarvey said, “There are a couple, the CS:GO is certainly one of them, that we’ve not yet been able to find a settlement on. That is in a legal situation right now. Pretty much all the others we’ve been able to work with people or we’re in the process.”
When asked for a timeline on paying out the debts owed to the CS:GO World Championship winners and the Dota 2 Game On invitational winners, McGarvey responded, “I don’t have specific timing other than we are working toward resolving these issues.”
McGarvey refused to “disclose specifics” about Azubu’s current funding sources, but did confirm that Lars Windhorst’s investment company Sapinda Group is not the only investor funding the company at this time.