The Department of Justice has reportedly opened a criminal investigation into HR and payroll startup Deel over allegations that it hired corporate spies to leak information about its biggest rival, Rippling, reports The Wall Street Journal.
In a statement emailed to TechCrunch, Deel said it was “not aware of any investigation. We will cooperate with the relevant authorities and provide the necessary information in response to the correct inquiries.”
Deel’s statement then made his own accusation against Rippling. It refers to its own lawsuit that claims that the competitor has “smear campaign”, which claims to defeat the competitor in the market, adding, “the truth will prevail in court.” Rippling declined to comment.
This is perhaps the biggest drama between the two HR startups.
To recap, Rippling demanded of Deel in May, and fix the settings in Junealleging that his rival planted corporate spies. A Rippling employee was caught in a sting operation and confessed to being a paid spy for Deel in an Irish court sworn written statement that reads like a Hollywood movie. The employee testified that he took Rippling’s sales leads, product roadmaps, customer account info, names of superstar employees, whatever he asked for, and handed them to Deel executives.
Rippling’s lawsuit, which is still pending, accuses his rival of violating federal racketeering laws (known as the RICO statute and typically used against organized crime) among other laws cited. But despite the use of phrases like “criminal syndicate,” this is a civil lawsuit, not a criminal prosecution.
Deel countersuited Rippling, also alleging spying by impersonating a customer, among other claims.
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The spy lived in fear
The man who admitted to spying agreed to testify in Rippling’s case, and Rippling agreed to pay for legal and travel expenses, according to the man’s cooperation agreement released as a court document and seen by TechCrunch. Deel now calls Rippling’s “paid sex.”
But the man also returned to the court stating that his family lived scared because he believed someone from Deel was following him. Deel’s lawyers initially denied this, however later discovered that Deel hired surveillance.
Payment to the spy
Rippling scored its most recent victory, in late November, when we get the bank notes. The records show that Deel transferred the funds to an account held by the wife of Deel’s COO, and 56 seconds later the account transferred the same amount to an account held by the confessing spy.
In the meantime, other court documents show that the founder and CEO of Deel Alexandre Bouaziz, who has been called the “mastermind” of the spying plot in Rippling’s lawsuit, has hired a high-powered lawyer William Frentzen to represent him. Frentzen is a partner with Morrison Foerster’s white-collar defense group and formerly headed 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 white-shoe law firm Quinn Emanuel. Spiro is a former prosecutor for 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 sprinkle of the show “Suits” on top.
Nothing is stopping investors from supporting Deel or Rippling. In October, Deel announced the hit worth $17.3 billion after raising $ 300 million led by Ribbit Capital and Andreessen Horowitz. Rippling hit a worth $16.8 billion in May after raising $450 million from investors like Elad Gil, Goldman Sachs Alternatives, and Y Combinator.