“Battle Over Startup Leaves Early Investor With No Equity, $2.6 Million Legal Bill § The Information PR War”, Sarah McBride2024-04-24 (tech)⁠:

When Denis Grosz invested in software startup Toptal LLC in 2012, he hoped the $1.38^$1₂₀₁₂ million bet could one day make him a fortune. Instead, it landed him on the receiving end of a lawsuit, leading to more than $2.6 million in damages against him and his new firm and possibly tens of millions more in legal fees.

…‘Portfolio Defense’: When it became clear that Toptal’s high-profile investor, Andreessen Horowitz, wasn’t going to help pursue a return, individual backers started looking for other options, according to emails shown in court. In May 2019, Grosz presented a “portfolio defense” to an investment club he belonged to, according to an email shown in court, floating possibilities like starting a competing company, initiating a lawsuit or working with a journalist on an expose.

First, though, he considered finding a professional investor to fight for liquidity in exchange for a cut of early investors’ stakes. In an email presented in court, Grosz said that an associate had described the approach as “outsourcing the assholery.” After cooling on that idea, he and Rockefeller discussed what the latter dubbed in another court-documented email as the “cancer patient” strategy: weakening Toptal to the point where it would make sense for [founder] Taso Du Val to sell it, forcing his hand in converting to a corporation. In court testimony, Grosz denied implementing a strategy by that name, and the jury found him not liable for civil conspiracy with Rockefeller and others.

Grosz also pitched The Information on an article about how Toptal had grown without handing out stock to employees, the court filings show. He hoped that bad press would help drive away customers or shame Du Val into action, according to an email shown in court. The Information declined to comment via a representative.

When the article [“Exclusive: At Booming Toptal, No Stock for Employees or Investors”] ran in August 2019, it captured the attention of Silicon Valley. A #boycottToptal movement emerged, and jobseekers posted on Reddit saying they wouldn’t work there.

In March 2020, Toptal sued Grosz in Nevada, where he lived at the time. Grosz countersued that June.

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