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Tinder co-founders sue their former company for $2bn

Natasha Bernal
Tinder's former CEO Sean Rad is among the claimants who say their former company cheated them out of gaining $2bn - © 2015 Bloomberg Finance LP.

A group of founders and former employees of dating app Tinder are suing the group's parent company, alleging that they were swindled out of $2 billion (£1.8 billion) worth of share options.

The 55 page legal claim against Match Group and IAC, the owners of Tinder, was filed in New York yesterday.

Among other things, it also accuses Match chief executive Greg Blatt, who was in control of Tinder at the time, of groping a female employee at a company party in 2016. The lawsuit claims that the misconduct took place in public but was "whitewashed" because of a 2017 scheme to complete a private valuation of Tinder.

Yesterday, IAC rejected the allegations and said in a statement it intends to "vigorously defend against them".

The lawsuit claims the valuation deliberately undervalued the dating app at the expense of the claimants, led by Tinder co-founders Sean Rad, Justin Mateen,  Jonathan Badeen, Alexa Mateen and Joe Munoz.

"Through a pattern of deception, defendants executed this scheme to systematically deprive the Tinder plaintiffs of their rights as option holders," the claim reads. "Defendants first conducted a disinformation campaign -- flooding the private valuation of Tinder in May 2017 with false, misleading and incomplete financial information and projections.

The group of claimants named on the lawsuit also included Tinder finance head James Kim, director of marketing Joshua Metz, head of brands and communications Rosette Pambakian, and director of engineering Paul Cafardo. Former Tinder designer Gareth Johnson and former chief tech officer Ryan Ogle were also in the lineup.

Sean Rad, Tinder founder, in quotes

By creating a false picture of Tinder's financial condition and prospects, IAC arrived at a $3bn valuation based on "bogus numbers", the court documents state. "Then, having undermined their first scheduled valuation of Tinder, defendants moved to extinguish the Tinder plaintiffs' rights to participate in the company's future upside."

The claim states that IAC "merged Tinder out of corporate existence" by combining it with Match without the prior knowledge or consent of either the board of directors or the claimants.

An IAC statement said: "With respect to the matters alleged in the complaint, the facts are simple: Match Group and the plaintiffs went through a rigorous, contractually - defined valuation process involving two independent global investment banks, and Mr. Rad and his merry band of plaintiffs did not like the outcome... but sour grapes alone do not a lawsuit make.  Mr. Rad has a rich history of outlandish public statements, and this lawsuit contains just another series of them.  We look forward to defending our position in court.”

The lawsuit points to the removal of Sean Rad as a key moment in the company's history. He was replaced by Mr Blatt, who was described in the document as a "longtime lackey" of IAC major shareholder Barry Diller allegedly put in place "in order to gut the agreements [with the claimants] and seize control of the valuation".

"As Tinder's 'interim' CEO, Blatt has a duty to comply with the terms of the agreements and advance the best interests of Tinder option holders. But as Match's chairman and CEO, Blatt had a professional and personal incentive to undervalue Tinder... Blatt was loyal only to the defendants," the claim states.

The court documents states that Blatt's sexual harassment was against Ms Pambakian, who is listed as a claimant, was reported to Tinder's parent company. 

"Because a credible investigation, let alone a firing in public view, would have derailed their scheme, defendants whitewashed Blatt's misconduct," the claim stated. "But just two weeks after their scheme concluded, defendants publicly announced Blatt's 'retirement', rewarding him with a lucrative golden parachute and a glowing farewell message from Diller praising Blatt's 'integrity'."

Match and IAC are accused of creating false financial projections, inflating Tinder's expenses and creating an "alternate universe" in which Tinder was "stagnating toward freefall". 

Gibson Dunn & Crutcher was approached for additional comment.