Fraud Prevention Startup NS8 Lays Off Hundreds, CEO Departs Amid SEC Fraud Investigation.
Forbes – David Jeans – Just months after raising over $100 million from venture capital investors, fraud prevention startup NS8 laid off hundreds of employees on Thursday after informing them it was under investigation for fraud.
In a letter sent to employees, the Las Vegas-based company said on Thursday that it was forced to downsize after “sudden and unforeseen circumstances.” The letter was shared on Twitter by local publication Vital Vegas. The startup’s CEO, Adam Rogas, abruptly left the company last week, he confirmed to Forbes.
A software engineer who joined NS8 this year told Forbes that employees were informed during an all-hands Zoom meeting on Tuesday that the Securities and Exchange Commission was investigating the company for alleged fraud. “We got on and were told that our finances were not what we thought they were, and there would be layoffs,” said the employee, who declined to be named because they were not authorized to speak to the press.
NS8 could not be reached for comment. The SEC declined to comment.
NS8’s effective shut down comes just months after the company had announced a massive $123 million Series A round led by global VC firm Lightspeed Partners. That funding round valued the company at more than $400 million, according to data from startup tracker PitchBook. Lightspeed and AXA Venture Partners, who also joined the most recent funding round, did not immediately respond to requests for comment.
In a lengthy response sent to Forbes over LinkedIn, Rogas said that he resigned for family and personal reasons. He went on to allege that NS8’s board and current management have used “an SEC investigation that began in November of 2019 to insinuate a more insidious narrative…I did not walk away with the companies [sic] money.”
He added that when NS8 raised an initial $50 million of the announced funding in the fall of 2019, the startup was nearly out of cash. The remaining funding was raised via a secondary round conducted by the new investors, Rogas claims. “The company was burning [$4 million to $6 million] a month and was going to run out of money in a couple of months,” he said.
In his response, Rogas expressed dismay that his handpicked president for the startup, Tiffany Kleemann, was not “given a chance to move the company forward.” But Kleemann, the employee who spoke to Forbes says, has been tapped to serve as acting CEO of what’s left of the business.
NS8 launched in 2016 to provide online fraud detection and prevention software for small businesses. In June, Crunchbase News reported that the company had reported a 200% jump in annual recurring revenue for 2019. “We’re seeing increased demand of about five to six times as a result of e-commerce adoption accelerating due to global events,” Rogas told the publication.
The company employed close to 225 people prior to the layoffs; Forbes could not verify precisely how many employees were let go, though a source said several hundred were affected, meaning not many employees would now remain at NS8. In addition to its headquarters in Las Vegas, NS8 operated offices in Miami, Amsterdam, Singapore, Melbourne, Australia, and San Ramon, California.
Rogas had previously founded or led at least three other software companies. According to his LinkedIn page, he also worked as a venture investor at NextGen Ventures until August. Rogas’ page on the professional network no longer lists his role at NS8.
For outgoing employees, news of the company’s near-total closure has proven devastating. “It was just shock, horror and despair,” says the software engineer who spoke to Forbes. “It’s not fun.”