TLDR;

  • I issued a personal loan to Sannpa Ltd (the Holding company of Team Fnatic and Fnatic Gear), which was made to support the growth of the Fnatic gear business and their launch of new hardware products.
  • The facility was structured in a way to try to avoid any conflict of interest or violation of League rules and does not grant me any actual influence or control over fnatic that would endanger the integrity of Esports.
  • G2 Esports and Fnatic are competitors, have separate ownership, and operate completely independent of each other.
  • After fact-finding with Fnatic and myself, Riot ruled today that the loan agreement between myself and Fnatic creates a form of indirect financial interest between both parties, violating the LCS Team Participation Agreement, while also clarifying that the loan did not establish any kind of direct ownership or control.
  • I mutually agreed with Riot to unwind the loan between myself and Sannpa Ltd to avoid any potential conflict in the future.
  • Esports only wins if we have a healthy ecosystem, and I continue to support the growth of the Esports industry through investments of time and finances.
  • Last, but not least: I criticize myself for not being very proactive in public communication. I am going to be more transparent about my work. Please feel free to reach out to me at any time.

Loan Background

I have known Fnatic’s founder, Sam Mathews, for over a decade. I have always supported Sam as a mentor and brainstorming partner in all his entrepreneurial endeavours, well beyond his Fnatic activities.

Following his journey with Fnatic, Sam and I discussed Fnatic’s short term need for external financing to build out their Fnatic gear products, and I wanted to be helpful.

We agreed that a short term loan was an instrument that could help finance gear inventory and enable further growth of the Gear business. In an attempt to avoid conflict and preserve integrity, the loan was made from my personal account (not my Holding company which holds the G2 shares) to  Sannpa Ltd (not to the Fnatic team ltd). The loan does not grant any information rights into the books of the company or influence their decision making and was used entirely for the above purpose, as any independent auditor could confirm. As this loan was issued by me personally, there is a security clause attached to it, in the unlikely case that things go totally wrong for Sannpa. This clause establishes a situation where if Sannpa were to become insolvent and consequently unable to pay back the loan, I would have priority over potential other creditors in claiming Fnatic’s equity (and ownership) as a way to recoup the lost money from the loan. Even in the worst case scenario, I would have the option to call for an independent broker to liquidate the shares in order to get my money back without having to own the shares myself at any point.

Riot’s LCS Rules and Enforcing Esports Integrity

Multi-Team ownership, and alongside it, influence over Sports teams is an essential topic in Sports integrity. It has been experienced and debated in traditional Sports for decades.

In order to understand how influence and/or control of Esports teams can manifest itself, see my summary page here for some context.

In European football, entities/individuals are allowed to have interest in several Clubs, yet at a lower threshold, typically between a few percentages of ownership up to 50% ownership, depending on the specific league or governing body. In no way am I stating that traditional Sports have created the perfect structures or systems, but they certainly have experience when it comes to Multi-Team ownership.

As a contrast, franchise-based American Sports look much different and much more restrictive. Entities/individuals are generally not allowed to own several Teams in one Sport, yet they can own Teams in different Sports, at the same time. However, in Esports, where there is no franchise-system today, and where Clubs typically operate across multiple games (have multiple teams) and leagues, it will likely take us all collectively many more years to figure out what works best.  

It is also worth noting, that in traditional Sports, we have seen loans issued between competing teams, even to finance player transfers. Here’s an article referencing to a EUR 2M loan the President of Bayern Munich issued to Borussia Dortmund back in 2004.

Riot is taking a very strong and restrictive position on ownership and financial ties, stronger than what is typically seen in traditional Sports and in Esports elsewhere. I respect Riot’s rules, their effort in creating them, and the rationale behind them. While one can see how their rule and sole authority can enforce absolute integrity,  one might also see how these rules could restrict Esports growth, when a simple loan, so far removed from actual league and team play, structured in the way of this Hilgers/Sannpa case leads to conflict.

What is most important though:

1/ That there is clarity of both the rule and interpretation: While Sam, the Fnatic management team and I tried our best to structure this loan in a way to avoid potential conflict or violation of rules, we should have simply approached Riot as an important stakeholder first. It wouldn’t have cost much time. My fault.

2/ That there is a healthy and educated debate on this topic allowing all stakeholders including teams, leagues, players and publishers to evolve and find the right balance on Sports integrity rulings.  

In conclusion, there is no question that I will resolve the loan in mutual agreement with Riot and Fnatic. It was never my intention to violate LCS or any other applicable rules. As a natural optimist, I also view this incident as an opportunity to continue a constructive discourse on Sports integrity rules.