Start-Up Fraudulently Misleads Investors


Plaintiffs are a group of investors who provided early funding for a start-up business.

Plaintiff Allegations

The investors alleged that at the time of their investment each received specific representations regarding the existence of intellectual property rights that the defendant company had obtained related to its business process. Subsequent to their investment, the investors learned that the defendant company had not actually obtained patents on the business process and that a separate company had previously obtained a patent on the business process. In addition, the investors alleged that the defendant company had been previously advised that their business process violated an existing patent and would need to pay a royalty or change their business process.

Defendant Allegations

Defendant claimed that all disclosures were accurate and that no misrepresentations were made to the investors.


Plaintiffs alleged that the investors suffered investment losses and interest in excess of $2,000,000. Defendants denied that there were any losses, but if any occurred they did not exceed $460,000.


The parties settled the matter for the policy limits of $1,430,000.


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