Papaya Files Chapter 15 Bankruptcy, Concedes It Can’t Pay $719 Million Judgment

Papaya Gaming claims it’s taking a “proactive and strategic” series of legal steps to protect its business while it appeals a catastrophic $719 million verdict against the company handed down on July 27 by a federal judge in New York.

Papaya, headquartered in Israel with its United States offices located in Delaware, announced today (Aug. 3) that the company behind Solitaire Cash has been granted a temporary stay of proceedings by the Tel Aviv District Court. In parallel, Papaya has commenced an ancillary proceeding in the District of Delaware’s U.S. Bankruptcy Court to “provide a coordinated legal framework while the appeal is pending.”

Papaya says the filings ensure the continuity of its “profitable business operations, its employees, its players, and all of its stakeholders” as the appeal process in the U.S. plays out. Though the Papaya release did not mention the word “bankruptcy,” the petition is a Chapter 15 filing, which is reserved for cross-border insolvency cases and international asset protection.

Casino.org obtained a copy of the Papaya Chapter 15 bankruptcy petition. The filing reveals that Tel Aviv District Judge Iris Lushi-Abudi granted the temporary stay of proceedings on Sunday (Aug. 2).

Lushi-Abudi acknowledged that if the appeal doesn’t go in Papaya’s favor, the company will face insolvency.

“The Applicants acknowledge that they are unable to pay the debt owed to Skillz if that debt becomes enforceable, as well as their remaining debts,” Lushi-Abudi wrote.

Papaya rival Skillz, now operating under the corporate identity Firy Inc., successfully sued Papaya on claims that the mobile skill gaming developer and its peer-to-peer platform misled consumers by not disclosing the widespread use of computer bots. In April, a jury agreed that Papaya violated federal false advertising and consumer law protections.

Papaya Appeal

Papaya was deemed financially responsible for damaging Skillz’s financial and reputational standing. US District Judge Denise Cote ordered Papaya to pay Skillz $719 million.

Papaya, which says it no longer uses bots in its real-money head-to-head mobile skill games, is appealing Cote’s penalty. In the interim, the court filings, should the District of Delaware’s U.S. Bankruptcy Court approve the Chapter 15 petition, would prevent Skillz from initiating collection efforts until the appeal is concluded.

“Given the company’s financial success, this action in accordance with Israel and U.S. laws allows us to continue operating as usual until the appeal in the United States is resolved,” said Papaya. “This is a proactive, responsible, and strategic step to preserve the Company’s operations and the rights of all parties during the appeal process, which may last several years. Papaya’s operations continue as usual, and the Company is fully meeting its ongoing obligations to its employees, players, vendors, and service providers, without any change.”

Appeal Status

Papaya has not yet formally appealed Skillz Platform vs. Papaya Gaming, though Papaya has announced its intentions to do so. The case will be considered by the U.S. Court of Appeals for the Second Circuit in New York City.