Getaround is getting around the courthouse. One of the car-sharing startup’s early investors, Geoffrey Shmigelsky, is suing the company, alleging fraud and unfair conduct.
“Our client supported Getaround and Mr. Zaid from the very start, only to be swindled out of $1.785 million that went straight into the pockets of Mr. Zaid’s family and friends, as we allege,” Gaw | Poe LLP Partner Samuel Song said in a statement. “Our client deserved better than this from a person he had supported and trusted for years, and we’ll do what it takes to get what rightfully belongs to him.”
Getaround, however, says “these claims are totally unfounded and we’re looking to get the case dismissed,” Getaround Director of Marketing Communications Jacqueline Tanzella told TechCrunch over the phone.
Specifically, the lawsuit alleges Getaround executives tricked Shmigelsky into selling his shares to their friends and family for $1.79 million less “than what they knew they were worth.” Early last year, investors became interested in purchasing Shmigelsky’s shares, the lawsuit states. But because Getaround is still a private company with scarce public financial information, “they struggled to value Plaintiff’s shares.” That’s when Shmigelsky said he asked Getaround CEO Sam Zaid for the information.
The lawsuit alleges:
Mr. Zaid saw an opportunity and agreed to help. Getaround had a contractual right of refusal to purchase any shares Plaintiff tried to sell, under the same terms and conditions of any sales agreement that Plaintiff entered into with a prospective buyer. Thus, Mr. Zaid was in a position to provide information designed to drive down the value of Plaintiff’s shares, and if Plaintiff agreed to a transaction at a lower price, Mr. Zaid could cause Getaround to exercise its right of first refusal to buy Plaintiff’s shares at a large discount off its true value. Moreover, since Getaround also had the right to assign its right of first refusal to whoever it wanted, Mr. Zaid could cause Getaround to exercise its right to purchase Plaintiff’s shares (at a discounted price) and then gift that opportunity to Mr. Zaid’s friends and family.
Based on the information Zaid and Getaround CFO Adam Kosmicki provided him, Shmigelsky alleges he sold 300,000 shares at $1.80 per share. He also alleges Zaid and Kosmicki concealed the information that Getaround was on the verge of closing an $18 million funding round priced at $7.75 per share. After allegedly invoking its right of refusal, Getaround bought back Shmigelsky’s shares at $1.80 per share.
But since those deals were not yet finalized and still in discussions, Tanzella said, “we were legally bound not to disclose anything that wasn’t complete and to fruition.”
Getaround then allegedly allowed Zaid and Getaround CTO Elliot Kroo’s family and friends to buy those shares for $540,000. Had that stake been valued at $7.75 per share, Shmigelsky would’ve made $2.33 million.
“It’s a really unfortunate situation,” Tanzella said. “I know the team did the best they could.”
Getaround also pointed out that the company helped facilitate the sale of Shmigelsky’s shares on the secondary market five times.
“This complaint seems to be driven by seller’s remorse,” Tanzella said.
Shmigelsky seeks no less than $1.79 million for compensatory and special damages. Getaround, however, does “plan on having this fully dismissed in court,” Tanzella said.
You can read the full complaint below.
Source: Tech Crunch