Jumio Sued By Investor That Backed The Startup

Facebook Cofounder Eduardo Luiz Saverin has been sued in Delaware court over allegations he committed fraud and breach of fiduciary duty of disclosure in the takeover of Jumio, the now-bankrupt identity verification company.

According to a court document, plaintiff Bloso Investments is seeking recovery of damages for breach of fiduciary duty of disclosure, misrepresentation, equitable fraud, fraud in the inducement and unjust enrichment. The lawsuit contends the “defendants grossly mismanaged Jumio, the result of which sees Jumio in bankruptcy and facing the combined scrutiny of the Department of Justice and the SEC and, worse for plaintiff, the complete loss of its nearly $5 million investment — an investment the plaintiff would not have made if defendants had disclosed the true nature of Jumio’s financial condition.”

The lawsuit alleges the defendants knowingly operated Jumio absent proper internal financial and accounting controls, which formed the basis for the plaintiff’s investments in Jumio. Defendants’ failure to manage Jumio subject to ordinary accounting and financial procedures sanctioned by GAAP and FASB led directly to the claims made in the lawsuit, the plaintiff stated. The lawsuit noted that, when the management of Jumio unveiled the extent of the financial irregularities rather than inform the plaintiff, they “immediately took action to engineer Jumio’s bankruptcy, coordinate the repurchase of Jumio at below fair market value and to secure complete liability releases related to the pre-petition actions which damaged Bloso.” The actions, according to the lawsuit, were “ specifically” designed to disenfranchise and dilute Bloso’s ownership in Jumio and to prevent it from exercising its rights as a uniquely noninterested shareholder of Jumio.

“Once defendants’ malfeasance was outed, defendants, for the first time in their tenure as directors and officers of Jumio, attempted to implement appropriate accounting and financial controls, while orchestrating a series of transactions designed to absolve them of any potential liability. Defendants’ actions ultimately deposited Jumio into Chapter 11 bankruptcy and permitted defendants to profit from Bloso and its investment interest in Jumio, while expanding for themselves better interest in new Jumio,” the lawsuit also alleges.