The Department of Justice has reportedly opened a criminal investigation into HR and payroll startup Deel. The probe is over allegations that Deel hired a corporate spy to leak information on its biggest rival, Rippling, according to The Wall Street Journal.
In a statement, Deel says that it is not aware of any investigation. The company added that it will always cooperate with relevant authorities and provide any necessary information in response to valid inquiries. Deel’s statement also made allegations against Rippling, pointing to its own lawsuit that claims its rival has been on a smear campaign. Deel stated it is beating the competitor in the market and that the truth will win in court. Rippling declined to comment.
This dispute is arguably the biggest drama between two HR startups. To recap, Rippling sued Deel in May and revised the suit in June. The lawsuit alleges that Deel planted a corporate spy within Rippling. The Rippling employee was caught in a sting operation and confessed in an Irish court to being a paid spy for Deel via a sworn written statement. The employee testified that he took Rippling’s sales leads, product roadmaps, customer account information, and names of superstar employees, handing it all over to Deel executives.
Rippling’s ongoing civil suit charged its rival with violations of the federal racketeering law, known as the RICO statute, among other laws. Despite using phrases like “criminal syndicate,” this is a civil suit, not a criminal prosecution. Deel has countersued Rippling, also alleging spying by impersonating a customer.
The man who confessed to spying agreed to testify in Rippling’s case, with Rippling agreeing to pay him for legal and travel expenses. Deel now calls the man Rippling’s paid witness. However, the man also went back to court alleging that his family was living in fear because he believed men from Deel were following him. Deel’s lawyer initially denied this but later discovered that Deel did hire surveillance.
Rippling scored a recent win at the end of November when it obtained bank records. The records indicated that Deel transferred funds into an account held by the wife of Deel’s COO, and 56 seconds later that account transferred the same amount to an account held by the confessed spy.
Meanwhile, a court document shows that Deel’s founder and CEO, Alexandre Bouaziz, who has been called the mastermind of the spying plot in Rippling’s lawsuit, has hired high-powered lawyer William Frentzen to represent him. Frentzen is a partner with a white-collar defense group and was formerly a chief in the U.S. Attorney’s Office.
Rippling’s lawyer is Alex Spiro, a former prosecutor known for his celebrity clients. The case has all the elements of a dramatic legal thriller.
None of this has stopped investors from backing either company. In October, Deel announced it hit a 17.3 billion dollar valuation after raising 300 million dollars. Rippling hit a 16.8 billion dollar valuation in May after raising 450 million dollars from investors.