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Tinder founders' lawsuit includes #MeToo allegation against ex-CEO

A lawsuit against Match Group filed on Tuesday includes an allegation of sexual misconduct against former CEO and Chairman Greg Blatt, though it does not name him as a defendant.

The allegation was mentioned on page six of a lengthy complaint filed by Tinder’s founders and early employees along with a handful of the dating app’s current executives against parent companies Match Group (MTCH) and IAC/InterActiveCorp (IAC), alleging a “scheme” to cheat them “out of billions of dollars by violating their contractual rights as option holders.”

REUTERS/Mike Blake/Illustration/File Photo

According to the complaint, after Tinder founder Sean Rad was “removed” from his CEO post in 2016, Match/IAC installed its own executives. Blatt, Match’s then-chairman and CEO, became the interim CEO of Tinder.

“The reason for these management changes was clear: to allow Defendants to control the valuation of Tinder and deprive Tinder option holders of their right to participate in the company’s future success,” the complaint states.

For their part, Match and IAC deny the allegations in the complaint. “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 companies said in a statement.

‘Blatt was compromised’

The complaint goes on to accuse Blatt — who is described in the court document as “a longtime lackey of IAC’s controlling shareholder Barry Diller” with “a reputation as a notorious bully with a volcanic temper” — of groping and sexually harassing Tinder’s vice president of marketing and communications.

“Having put Blatt in charge of carrying out their scheme, Defendants needed him to remain at the helm of Tinder long enough to finish the job. But Blatt was compromised: during and after Tinder’s 2016 holiday party in Los Angeles, Blatt had groped and sexually harassed plaintiff Rosette Pambakian, Tinder’s vice president of marketing and communications, with colleagues present,” the complaint states. “Blatt’s workplace misconduct was reported to Defendants. Because a credible investigation — let alone a firing in public view — would have derailed their scheme, Defendants whitewashed Blatt’s misconduct. Defendants kept Blatt in place as Tinder’s ‘interim’ CEO long enough to complete the private valuation and secret merger of Tinder. 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 praying Blatt’s integrity.”

According to the complaint, Rad reported the alleged misconduct to the company’s general counsel Jared Sine in mid-2017 and demanded an independent investigation.

“Defendants placed Sine and the head of Match’s Human Resources Department, Lisa Nelson — who had worked for Blatt for more than 10 years — at the head of the ‘investigation,'” the complaint states.

The complaint also alleges that Blatt asked Rad to meet in person in September 2017 and was “irate” that he had reported the allegations. On September 14, 2017, Rad was terminated by the general counsel.

A spokesperson for Match didn’t immediately return requests for comment.

Blatt was not named as a defendant, nor was was IAC’s chairman Barry Diller.

A ‘lowball’ $3 billion valuation

The broader complaint dealt largely with contracts Tinder’s founders and early employees had made with the defendants, IAC and Match Group, about stock options. They claim IAC and Match depressed Tinder’s valuation, permanently depriving them of money they had rightfully earned.

The Tinder plaintiffs are Rad, the founder who served as CEO twice, and other early employees including, Paul Cafardo, the company’s first Android engineer who joined in April 2013; Gareth Johnson, the lead designer who joined in February 2014;  Alexa Manteen, who joined in August 2012 as the CTO; Justin Mateen, the co-founder who served as CMO until September 2014; and Ryan Ogle, who joined in August 2012 as the CTO.

Current employees suing include Jonathan Badeen, the co-founder who invented the “swipe” function and now serves as the chief strategy officer; James Kim, the current vice president of finance for Tinder; Joshua Metz, who worked on the company’s international expansion and now serves as the director of marketing; and Pambakian, who joined in 2012 as a director of communications and currently serves as the vice president of marketing and communications.

According to the complaint, the founders and early employees signed a contract in 2014 with the defendants that awarded them stock options that represented more than 20% of the value of Tinder. The scheduled puts would be exercised “promptly after May 2017, November 2018, May 2020, and May 2021.”

The plaintiffs claim their contract was breached after Match/IAC “conducted a disinformation campaign — flooding the private valuation of Tinder in May 2017 with false, misleading, and incomplete financial information and projections.”

The plaintiffs allege that IAC/Match “manufactured” a $3 billion valuation “based on their bogus numbers.” Soon after, they allege that there was a “secret merger” that converted all of their Tinder stock options into Match options at the “lowball” $3 billion valuation.

From startup to “cultural icon”

In the complaint, Tinder is characterized as a company that grew from a startup in 2012 to a “cultural icon” earning more than $350 million in revenue in 2017.

The complaint also points to the company’s recent successes highlighted on Match Group’s earnings call last week. During that call, CEO Mandy Ginsberg said Tinder “remains the growth driver” of the business. During the quarter, the dating app saw 81% year-over-year growth in subscribers and 136% year-over-year growth in revenues. She later added that Tinder is on pace to exceed $800 million in revenue in 2018, calling it “a phenomenal achievement in less than four years of monetization.”

“The Tinder Plaintiffs founded and built Tinder into the company it is today,” the complaint states. “They include several of Tinder’s current senior executives: its Chief Strategy Officer, Vice President of Finance, and Vice President of Marketing and Communications. Standing alongside the company’s founders and early employees those senior members of Tinder’s current leadership team are now speaking out against IAC and Match’s systematic deprivation of their rights — a scheme that has harmed not only the Tinder Plaintiffs but scores of other current and former Tinder employees who also held Tinder options.”

Blatt did not immediately respond to a LinkedIn message seeking comment.

Here’s the full response from IAC and Match Group:

The allegations in the complaint are meritless, and IAC and Match Group intend to vigorously defend against them.

Since Tinder’s inception, Match Group has paid out in excess of a billion dollars in equity compensation to Tinder’s founders and employees. 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. Mr. Rad (who was dismissed from the Company a year ago) and Mr. Mateen (who has not been with the Company in years) may not like the fact that Tinder has experienced enormous success following their respective departures, 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.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.