The Department of Justice has reportedly launched a criminal investigation into HR and payroll startup Deel. This follows allegations that Deel hired a corporate spy to leak sensitive information about its primary competitor, Rippling, according to The Wall Street Journal.
In a statement sent to TechCrunch, Deel claimed it is “not aware of any investigation” and expressed its intention to cooperate with authorities, providing any necessary information in response to formal inquiries.
Deel also made its own allegations against Rippling, referring to its ongoing lawsuit that accuses Rippling of conducting a “smear campaign.” Deel claims it is outperforming Rippling in the market and asserts, “the truth will win in court.” Rippling has declined to comment.
This situation represents perhaps the biggest conflict between two HR startups in history.
To summarize, Rippling sued Deel in May and updated the lawsuit in June, alleging that Deel had hired a corporate spy. This employee was caught in an undercover operation and reportedly confessed to being a paid spy for Deel. In a sworn statement given in an Irish court, the employee’s account reads like something out of a Hollywood script. He testified that he provided Deel executives with Rippling’s sales leads, product roadmaps, customer account information, and even the names of key employees.
Rippling’s ongoing lawsuit accuses Deel of violating federal racketeering laws, which are usually applied to organized crime, among other charges. Despite the strong language, including phrases like “criminal syndicate,” it is a civil suit, not a criminal prosecution.
In response, Deel countersued Rippling, claiming that Rippling also engaged in spying by impersonating a customer, adding to the tension between the two companies.
The spy’s fear
The man who admitted to spying has agreed to testify in Rippling’s case, with Rippling covering his legal and travel expenses as per their cooperation agreement, which has been made public in court documents. Deel has labeled this man as Rippling’s “paid witness.”
However, the spy also returned to court, stating that he was living in fear because he suspected that individuals from Deel were following him. Initially, Deel’s lawyer denied this assertion, but later admitted that Deel did indeed hire surveillance.
Payments to the spy
In late November, Rippling achieved a significant victory by obtaining bank records that revealed Deel had transferred funds into an account managed by the wife of Deel’s COO. Just 56 seconds later, that same amount was transferred to the account of the confessed spy.
Additionally, documents show that Deel’s founder and CEO, Alexandre Bouaziz, who has been characterized as the “mastermind” behind the alleged spying plot, has enlisted high-profile attorney William Frentzen for his defense. Frentzen is a partner in the white-collar defense group at Morrison Foerster and previously served as the chief of the corporate and securities fraud unit in the U.S. Attorney’s Office for the Northern District of California.
Rippling is represented by Alex Spiro from the prestigious law firm Quinn Emanuel. A former prosecutor with the Manhattan District Attorney’s Office, Spiro is known for his charismatic personality and a roster of celebrity clients that includes Elon Musk and Jay-Z.
The unfolding situation resembles a plot from a John Grisham novel, layered with elements reminiscent of the show “Suits.”
Despite the drama, both Deel and Rippling continue to attract investor attention. In October, Deel announced it had reached a valuation of $17.3 billion after securing $300 million in funding led by Ribbit Capital and Andreessen Horowitz. Meanwhile, Rippling achieved a valuation of $16.8 billion in May after raising $450 million from investors like Elad Gil, Goldman Sachs Alternatives, and Y Combinator.
