Crown Resorts' shareholders have launched a class action against the gambling giant for a sharp drop in its share price following the arrest of 18 employees in China.
Law firm Maurice Blackburn alleges shareholders in James Packer's company suffered losses when Crown shares dropped almost 14 per cent after the staff were detained for "gambling crimes" in police raids in October last year.
The Federal Court statement of claim alleged Crown breached the Corporations Act by failing to make timely and accurate disclosures to the market about the risks it was taking in China and engaged in misleading or deceptive conduct about Chinese market growth.
The employees, including Australian executive Jason O'Connor, pleaded guilty to the crime of promoting gambling in China in June.
Maurice Blackburn's head of class actions, Andrew Watson, said Crown took a gamble amid Chinese government warnings that it intended to crack down on foreign casinos marketing to its citizens on the mainland.
"Shareholders should have been apprised of the risks that Crown was taking in China and the threat they posed to the company's revenue streams," he said.
"Chinese authorities could not have made the risks of marketing gambling any plainer to Crown or other casino operators, yet Crown ignored these warnings."
The share price plunged 13.9 per cent, from $12.95 to $11.15 following news of the arrests.
The class action covers individual and institutional investors who bought shares between February 6, 2015 and October 16, 2016.
Crown has vowed to vigorously defend itself.
The arrests were a blow to Crown's plans for Sydney's Barangaroo casino, which was promoted as a venue for wealthy gamblers — known as VIPs — many of whom come from mainland China.
Legal documents show Crown reported annual VIP revenue worth more than $1 billion, but VIP turnover at its Australian casinos fell by 49 per cent in the past financial year.
In a separate Federal Court case, Crown and pokies manufacturer Aristocrat are being sued by former gambling addict Shonica Guy who claimed the Dolphin Treasure machine was deceptive and misleading.
Crown has also rejected whistleblowers' claims staff deliberately tampered with poker machines at its Melbourne casino to gouge more money out of gamblers and circumvented anti-money laundering laws.