The former CEO and CTO of Ethereum-based advertising company Bidooh admitted they copied proprietary software for use in a new rival venture.
Abdul Alim and Shahzad Mughal, who co-founded the Manchester, U.K.-based firm in 2017, admitted April 7 to all counts of copyright infringement and misuse of confidential information, as well as a breach of their fiduciary duties as directors and of their shareholders' agreements.
As CoinDesk reported in January, Alim and Mughal were at the center of controversy after they were ejected from Bidooh and accused of stealing company software. The remaining Bidooh directors, including Michael Edelson, a non-executive director of Manchester United football club, took legal action in 2019 and claimed they had attempted to steal clients for their rival venture, Flydooh.
Bidooh is a digital advertising company that allows companies to broadcast customized ads to anyone walking past their interactive billboards. Raising $5 million in an initial coin offering (ICO) in 2018, advertisers can pay by the second with the firm's Ethereum-based DOOH cryptocurrency.
Bidooh's directors secured a high court order last September ordering Alim and Mughal to hand over any software and code related to Bidooh and Flydooh, as well as an injunction halting all their activities until a full trial. Both Alim and Mughal previously admitted to counts of copying facial analytics software used in the billboards in November 2019.
In January 2020, Alim and Mughal countersued Bidooh, accusing the remaining directors of not paying them £320,000 (US$395,000) in back salaries. Alim told CoinDesk at the time his former employer was "completely screwing us over" and that the company had effectively been "hijacked from them."
Alim also claimed the proprietary technology had already been ported over to a similar digital advertising platform, Promokio, which was owned solely by Bidooh director Gary Partington.
Alim and Mughal have now agreed to pay Bidooh £80,000 (nearly $100,000) in interim costs, with a full amount to be decided at a later date. Their countersuit has been dropped and all their remaining shares in Bidooh will be handed back to the company for a nominal fee.
Abdul and Mughal have until April 29 to pay the interim costs to Bidooh.
"The final court order signifies the end of a frustrating and unfathomable chain of events," Edelson said in a statement. “Naturally, as an investor and shareholder, I have been outraged that the people we invested a lot of belief and trust in chose to work against us for personal gain."
“Since the initiation of the first court order on [Sept. 11, 2019], a number of false counter-claims have been made by Alim and Mughal against Bidooh and individuals linked to the business, which has been very distressing for all involved. These have now been dropped and we are confident the final court order sets the record straight.”
Bruce Jones who, as head of intellectual property at Kuits Solictors, represented Bidooh, also said: "Abdul Alim and Shazhad Mughal appear to have mistakenly believed that they could behave as they wished. In over 30 years of legal practice I have never before encountered such flagrant infringements and abuses.
“That they were undertaken by two individuals in whom so much faith and trust had been placed by investors who were willing to back them, makes their conduct all the more egregious."
In an email to CoinDesk, Alim said they had established rival advertising firm Flydooh in an attempt to start again. "But we failed to realize that we had signed over the [intellectual property] to the limited company and that Bidooh owned the IP," he said.
Alim said that, although they had wanted to continue fighting the legal battle, they had no choice but to concede: "Unfortunately, we have had to admit to the claims as the legal costs amounted to over £100k [$123,000] and it would have cost us another £30k [$37,000] to prepare for and attend court, and we don’t have deep pockets like Michael Edelson."
He added he and Mughal continue to believe they had been "taken for a ride," and they should have acted earlier.
Alim also claimed Edelson advised both him and Mughal, when they were still at Bidooh, to become Uber drivers and that Partington had sometimes made personally disparaging remarks. A Bidooh spokesperson denied the allegations and countered with other accusations about Alim’s personal conduct when he was a director at the company.
"Getting screwed out of your own company hurts," Alim added. "It’s not easy seeing the company that we started being taken from us."
Asked if there was any truth to Alim's claims his digital advertising company had effectively been hijacked, a Bidooh spokesperson said: "This claim is untrue as revealed and verified by the final court order."
The spokesperson added that Alim's and Mughal's actions have had a "significant impact on the business," including losing important clients and effectively destabilizing the platform. The firm is now having to reassess the product and, in light of the coronavirus pandemic, are focusing on the business' survival, the spokesperson said.
UPDATE (April. 24, 12:15 UTC): This article has been updated with an additional response from a Bidooh spokesperson.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.