Online gaming company Empire Online had received a written warning about a possible change in its relationship with rival gaming site Party Gaming, but did not inform its investors about it in a pre-float prospectus sent out earlier this year. The news was reported this week by The Sunday Times in London.

The Times said that Empire, which is held by Noam Lanir, discussed the possibility of a change, but said it would have no effect on its income. The prospectus also said that Empire's board of directors had no information about an intention to alter the relationship between the two companies.

Empire Online went public in June, according to a market value of $925 million, and reached a peak of over $1 billion. A series of blows have reduced its market value to about $348 million. Most of the loss in value followed an announcement by Party Gaming that it was moving its players to a separate platform, therefore ending a relationship that allowed players from various gaming sites to bet against each other.

The two companies had been in merger talks until last week, when Empire rejected Party Gaming's offer to purchase Empire for 60 pence a share. It then announced its intention to take legal action against Party Gaming for its separation of platforms, which left Empire users with an inferior platform and the steep share price plunge. One observer close to Empire believes that Party Gaming's move was aimed at causing its rival to lose value so it could buy out Empire for a below-market price.

Following the The Sunday Times publication, individuals close to the Lanir group said they believe several revelations will be revealed regarding the relationship between the two companies.

The Times said that Party Gaming sent the letter about its intentions to Empire on May 4, the month before Empire went public. Empire sources told the newspaper they did not remove anything from the company prospectus, and that the real damage caused by Party Gaming's encouraging Empire bettors to switch to Party sites, not the platform change.