The co-founder and CEO of Aptos Labs, the Layer 1 blockchain startup founded by former Diem employees, faces a lawsuit from an early investor alleging she was cheated out of her fair share of equity.
Shari Glazer and her firm Swoon Capital are seeking up to $1 billion from Matonee, also known as Aptos Labs, according to a complaint filed with the Supreme Court of the State of New York in March.
Aptos Labs was founded by former Meta employees with the goal of building a scalable Layer 1 blockchain, able to reach an audience of “billions” of people. The technology is based on the Diem payments network, which Aptos’s founders worked on while at Meta, the parent company of Facebook.
Glazer and Swoon claim that a “fraudulent scheme” implemented by Aptos co-CEO Mo Shaikh, deprived her of her rightful share of a partnership in a “blockchain technology venture,” according to the court filing. Avery Ching is the co-founder and CTO.
Shaikh and his lawyers at Quinn Emmanuel are seeking to have the case dismissed, the filings dated May 17 show.
“Avery and I founded Aptos Labs to provide universal access to a blockchain that meets the needs of billions of people globally,” Shaikh wrote in an emailed statement. “Shari Glazer’s allegations are filled with material inaccuracies and mischaracterizations that attempt to take credit for the work of others.”
“Our team has been working for years to develop and perfect a reliable, scalable and upgradable Layer 1 blockchain technology, which is why we will vigorously fight these baseless accusations.”
Glazer, whose family owns a global sports empire including the Tampa Bay Buccaneers NFL team and Manchester United soccer club, says she had taken Shaikh on as a consultant in August 2021 and paid him $35,000 to identify existing blockchains that Swoon Capital or Glazer could acquire and repurpose for her own project.
Shaikh had later suggested that he assemble a team of engineers to develop a new, scalable blockchain, the legal document says. Glazer agreed, and also said that Shaikh would be an equal partner. The agreement progressed with Glazer saying she would introduce him to her network, the document adds. Glazer also says she helped convince some of the engineers to join the new venture by laying on entertainment and an expensive lunch for them.
Lawyers for Glazer declined to comment on ongoing litigation.
Aptos had announced in March that it had been funded to the tune of $200 million in a round led by Andreessen Horowitz (a16z) with other investors ranging from Multicoin Capital to Coinbase Ventures. Katie Haun, Three Arrows Capital, ParaFi Capital, Irongrey, Hashed, Variant, Tiger Global, BlockTower, FTX Ventures and Paxos also joined the round.
At the time, while not disclosing numbers, Aptos founders told TechCrunch they were “well off into the unicorn territory,” indicating that the company was valued at a minimum of $1 billion.
The complaint states that before the funding round, Glazer agreed to make an initial $10 million investment in the venture (or more if necessary), and secured an additional $10 million financing commitment from a global media and entertainment conglomerate.
Glazer says that the deal she and Shaikh had in progress meant the project would progress without venture capital funding, as this type of investment would dilute ownership.
While this was happening, Glazer alleges that Shaikh was secretly seeking dilutive, early stage VC funding from a16z, even though he previously said he was not pursuing an investment from the firm because “VCs are the devil.”
Still, documents submitted by Shaikh’s lawyers call Glazer’s claim a “work of fiction” and publish WhatsApp messages and redacted transcripts of affidavits made by Glazer on the particulars of the case.
They had argued messages between Shaikh and Glazer show he had said much of the talent he was trying to hire for the new company would need to be paid north of $1 million a year, so the amount Glazer was proposing would not be enough.
The WhatsApp transcripts show he told her that the company would need “$75m-$100m” to launch. He also named the VCs he was speaking with about the project.
The documents also cast doubt on the timeline of events and argue that detail was lacking about the distribution of shares in the future company, had the the media and entertainment conglomerate Glazer mentioned also been brought on board.
It also argues the agreement was an oral amendment to Shaikh’s consulting agreement, which can only be amended in writing.
If the case is not dismissed it could mean a protracted legal battle for the new company.
The case is being pushed through the Supreme Court of the State of New York and is index number 650956/2022. It is known as Glazer, Shari et al vs. Shaikh, Mohammad et al.
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