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Lawsuit claims crowdfunded start-up founders used company money to pay for strip clubs, groceries, and rent

Former bookkeeper accuses brothers of asking her to falsely enter spending as legitimate business payments

PUBLISHED : Tuesday, 09 August, 2016, 10:13am
UPDATED : Tuesday, 09 August, 2016, 11:42am

Two brothers used their company's money as a "personal piggy bank," a new lawsuit by their former bookkeeper claims, before the start-up shut down suddenly last week.

Among the expenses attributed to the cofounders were thousands spent on vacations to Hawaii, personal rent for their apartments, trips to competitions in Las Vegas, and a visit to a strip club, the lawsuit states.

The brothers, Marcus and Mitch Weller, founded Skully, a motorcycle-helmet company, three years ago. After raising close to US$2.5 million in an Indiegogo campaign, the company was supposed to be on track to produce an augmented-reality motorcycle helmet that had a rear-view camera — sort of like having eyes in the back of your head.

But the company disintegrated in the last month after the board forced the brothers out of the company in mid-July. On Friday, TechCrunch reported that the company they had built was shutting down altogether, despite having raised close to US$15 million through a mix of crowdfunding and venture capital.

Marcus Weller could not be reached for comment.

The new lawsuit, reported earlier by BuzzFeed, may shed some light on where the money went.

According to the former bookkeeper, Isabelle Faithauer, the brothers treated the company's bank accounts as a "personal piggy bank" and "demanded that Plaintiff conceal the true nature of the expenses by entering them in Skully's books to make it appear that the expenses were incurred for legitimate business reasons, which in fact they were clearly not."

The lawsuit goes on to list 19 examples of the reportedly false expenses, including:

•Rent for a personal apartment in the Marina district of San Francisco, then the subsequent moving and painting expenses when they moved to the Dogpatch
•Restaurant meals and personal groceries charged to the company AMEX card
•A payout of US$80,000 to an unnamed cofounder, which was recorded as a trip to China
•A US$13,000 Mai Tai and Extreme Tech Challenge in Las Vegas
•A Lamborghini rental during a personal vacation
•A "world tour" trip that included US$2,000 for limos in Florida, US$2,000 for a strip club, and US$2,345 worth of paintings from Hawaii.

A notice on the company's Indiegogo page now alerts those customers who preordered the US$1,450 helmet that they'll have to go through bankruptcy court to try to reclaim any money.

"Our team is devastated and deeply saddened that our valued partners, vendors, employees and customers have been negatively affected by what has transpired," the company said in its closing notice. "We realise there are many unanswered questions and that this is a very upsetting situation. We are truly sorry."

See Also:
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Germany is writing to UK start-ups to lure them to Berlin after Brexit

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