The Justice Department has reportedly opened a criminal investigation into human resources and payroll startup Deel, following allegations that it hired a corporate spy to leak information about its biggest rival, Rippling, reports The The Wall Street Journal.
In an emailed statement to TechCrunch, Deel said it is “not aware of any investigations. We will always cooperate with the appropriate authorities and provide all necessary information in response to valid requests.”
Deel’s statement then makes its own allegations against Rippling. He points to his own lawsuit which alleges his rival has waged a “smear campaign,” claiming it is beating the competitor to market, and adding: “the truth will prevail in court.” Rippling declined to comment.
This is arguably the biggest drama ever between two HR startups.
To recap, Rippling sued Deel in May, and revised the costume in Junealleging that its rival planted a corporate spy. Rippling employee was caught in a sting operation and admitted to being a paid spy for Deel in an Irish court via a sworn statement that reads like a Hollywood movie. The employee testified that he took Rippling’s sales leads, product roadmaps, customer account information, names of superstar employees, whatever was requested, and handed them to Deel executives.
Rippling’s ongoing lawsuit accuses his rival of violations of the federal racketeering statute (known as the RICO statute and typically used against organized crime) among other cited laws. But despite the use of terms like “crime syndicate,” this was a civil action, not a criminal prosecution.
Deel countersued Rippling, also alleging espionage by posing as a client, among other allegations.
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The spy lived in fear
The man who confessed to spying agreed to testify in Rippling’s case, and Rippling agreed to pay him legal and travel costs, according to the man’s cooperation agreement released as a court document and seen by TechCrunch. Deel now calls the man Rippling’s “paid witness.”
But the man also returned to court, alleging that his family living in terror because he believed Deel’s men followed him. Deel’s lawyer initially denied this claim, but later discovered that Deel had hired surveillance services.
Payment to the spy
Rippling won his last victory at the end of November, when he got the bank statements. Records indicated that Deel transferred funds to an account held by the wife of Deel’s chief operating officer, and 56 seconds later, that account transferred the same amount to an account held by the confessed spy.
Meanwhile, another court document shows that Deel founder and CEO Alexandre Bouaziz, called the “mastermind” of the espionage plot in Rippling’s trial, hired high-profile lawyer William Frentzen to represent him. Frentzen is a partner in Morrison Foerster’s White Collar Defense Group and was previously chief of the Corporate and Securities Fraud Unit of the U.S. Attorney’s Office for the Northern District of California.
Rippling’s attorney is none other than Alex Spiro of the Quinn Emanuel Law Firm. Spiro is a former prosecutor in the Manhattan District Attorney’s Office, known for his big personality and long list of celebrity clients, ranging from Elon Musk to Jay-Z.
So it all sounds like a plot from a John Grisham novel, with a pinch of the “Suits” series thrown in.
None of this stopped investors from backing Deel or Rippling. In October, Deel announced that it had hit a valuation of $17.3 billion after raising $300 million led by Ribbit Capital and Andreessen Horowitz. Ripple hit a Valuation of $16.8 billion in May after raising $450 million from investors like Elad Gil, Goldman Sachs Alternatives and Y Combinator.