Fintech Brex Says a CEO Hid a Lawsuit During Their Acquisition Talks
- Brex said in a new lawsuit that its board terminated Pry Financials CEO Andy Su in August.
- The fintech startup, which acquired Pry for $90 million, accused Su of concealing an ongoing lawsuit.
- Su filed his own wrongful termination suit against Brex in California.
The fintech giant Brex has pushed out the co-founder of Pry Financials, a software startup it acquired in April, accusing him of concealing material information during their deal talks this year.
In a lawsuit filed in Delaware Chancery Court, Brex said that Pry Financials CEO Andy Su admitted to its lawyers in May, after their acquisition closed, that he’d hid an ongoing contract lawsuit against him and Pry. Brex filed its complaint on Aug. 30.
A Silicon Valley darling, Brex is currently valued at $12.3 billion. Cofounded by Pedro Franceschi and Henrique Dubugras, now co-CEOs of the company, Brex offers credit cards, cash management, and expensing services for businesses. Its customers include startups like Carta, Thirty Madison, and Room, as well as larger companies such as DoorDash. In April, Brex acquired Y Combinator-backed Pry Financials for $90 million, according to TechCrunch.
Brex said in the complaint that it discovered the lawsuit shortly after acquiring Pry Financials, when it was added as a defendant in that dispute. The lawsuit at issue was brought by a seller for another company that Su had founded — Su later estimated to Brex that the vendor was seeking some $10 million in damages against the defendants, according to Brex’s complaint.
Brex said that when its counsel questioned Su about it, he agreed that he had withheld knowledge of the lawsuit before their deal closed.
“Mr. Su took full responsibility for the situation caused by his conduct, stating it was ‘on me’ and acknowledging the ‘huge loss of trust’ his conduct had caused,” Brex wrote in its complaint.
Su and his attorney did not respond to Insider’s requests for comment. A representative for Brex also declined to comment.
The agreement for Brex to acquire Pry Financials had called for Su to disclose any ongoing lawsuits involving him or his company, according to the complaint.
The Brex board met in July and determined that Su’s concealment of the suit was grounds to terminate him under the merger agreement, according to Brex. After his termination by Brex on Aug. 2, Su filed his own wrongful termination complaint in state court in San Francisco.
Brex has told the Delaware court that Su shouldn’t be allowed to pursue his claims as an employment action in California, arguing that the dispute is fundamentally about his alleged violation of their merger agreement, and therefore bound by the contract terms to be litigated in Delaware.
Pry Financials, a San Francisco-based software platform meant to help startups with their accounting and budget processes, raised nearly $6 million, including a $4.2 million seed round last year that drew investors including Y Combinator, Hyphen Capital, NOMO Ventures and Global Founders Capital, according to PitchBook.
Su, who studied computer science at University of California, Berkeley, previously founded InDinero, another Y Combinator-based accounting software startup that has raised $14.4 million, according to PitchBook.