DALLAS — This article was originally published by our content partners at the Dallas Business Journal. Read the original article here.
Two years after the failure of GloriFi, the wealthy businessmen who backed the "anti-woke" banking startup find themselves locked in a high-stakes legal battle over the events that led to its demise.
Businessman Toby Neugebauer, an oil and gas investor, started Dallas-based With Purpose Inc., which did business as GloriFi, in 2021. GloriFi aimed to provide a conservative alternative for investors who have become frustrated by the commitments some financial giants have made to environmental, social and governance initiatives, otherwise known as ESG.
GloriFi touted what it called pro-American values such as capitalism, family and law enforcement, with its marketing focused on themes like "God and Country" and "Freedom and Independence." The approach garnered it the reputation of an "anti-woke bank."
GloriFi received financial backing from big-name investors including Ken Griffin of Citadel LLC and Peter Thiel, the co-founder of PayPal, Palantir Technologies and Founders Fund. Other backers included Jeff Sprecher, the founder, CEO and chairman of Intercontinental Exchange, which owns the New York Stock Exchange; Rick Jackson, CEO of Georgia-based Jackson Healthcare LLC; Nick Ayers, former chief of staff to Vice President Mike Pence; and Vivek Ramaswamy, an entrepreneur and former Republican presidential candidate.
Despite the big names behind it and the prospect of going public with a possible $1.65 billion valuation, GloriFi announced plans to shut down in November 2022 after running out of money. The company filed for Chapter 7 bankruptcy protection in February 2023. Neugebauer — a prominent energy investor who co-founded Quantum Capital Group — now finds himself in a legal fight with his billionaire investors as they wrangle over who was responsible for GloriFi's downfall and how to settle what remains of its assets.
The billionaires who backed GloriFi claim Neugebauer mismanaged the company, attempted to obtain it for himself and drove it into the ground.
In October 2022, the Wall Street Journal reported that GloriFi was undergoing financial troubles and that some employees were concerned about a chaotic work environment, including allegations of volatile behavior by Neugebauer.
Neugebauer denied those allegations in an interview and said an investigation by law firm Locke Lord LLP cleared him of wrongdoing. He said the story was part of a scheme by the company's billionaire backers to destroy his reputation and create a liquidity crisis for GloriFi.
Neugebauer filed lawsuits against the billionaires in Delaware and Georgia in May, accusing the early investors of racketeering. The lawsuits claim the investors conspired to steal trade secrets and intellectual property.
It remains to be seen whether Neugebauer's lawsuits will move forward. Scott Seidel, the trustee overseeing the GloriFi estate, had sued Neugebauer in May and questioned his motives. Seidel accused Neugebauer of filing the lawsuits to "get his version of events out" and using the judicial system "for propaganda and publicity."
Seidel's complaint also said damages sought for most Neugebauer's allegations should actually be considered property of the GloriFi estate, since it was the business that would have been harmed by the investors.
But in late July, Neugebauer and Seidel agreed to a compromise and proposed settlement that could pave a path for Neugebauer's lawsuits to proceed. The settlement, if approved by the bankruptcy court, would provide the estate with a total of $4.5 million, consisting of a $2.25 million payment and a $2.25 million loan. Of that total, $1 million would be set aside for litigation expenses. The trustee would pay $2.5 million to note holders to reduce secured debt, and the remainder would be used for administrative expenses.
The entire saga is an example of Dallas' increasingly prominent role in the world of global finance, especially when it comes to combining financial maneuvering with the state's historically conservative politics.
Details on legal spat
The lawsuits by Neugebauer and his related business entities claim the investors implemented their "well-thought-out plan" because GloriFi’s valuation skyrocketed before they could obtain more than a small non-controlling ownership interest of less than 20%.
That plan included so-called "Trojan horse" investments in the form of convertible debt, obtaining the right to block subsequent capital raises, attempts to put "their people" in executive positions at GloriFi while "attempting to sow dissension" within the existing ranks and insincere promises to keep funding the company while launching a campaign to block competing sources of capital, according to the 140-page complaints.
Neugebauer seeks $100 million in personal damages, compensatory damages to be determined at trial and triple damages under anti-racketeering law.
"My goal is for the people who were going to hit that $1.65 billion, those employees, to be made whole," Neugebauer said. "Why wouldn't we do that?"
The complaints also harped on other financial services companies with similar "anti-woke" strategies with ties to GloriFi investors. Ramaswamy launched Strive Asset Management in early 2022 with backing from Thiel, billionaire hedge fund manager Bill Ackman and U.S. Sen. J.D. Vance, now the Republican vice presidential candidate.
Ramaswamy and Strive did not respond to requests for comment.
Neugebauer also named Joe Ricketts, founder and former CEO of TD Ameritrade, as a defendant in the lawsuits. Neugebauer claims Ricketts helped Coign, another conservative financial services company, take GloriFi's "We the People" tagline and the design of a credit card. But it's unclear if Ricketts was ever involved with Coign.
Neugebauer's lawsuits also pointed to a conservative bank called Old Glory Bank, co-founded by CEO Mike Ring and President Eric Ohlhausen and a group including Ben Carson, Larry Elder and John Rich. The lawsuits claimed Ayers, one of GloriFi's backers, played a role in Old Glory's founding and that the bank copied GloriFi's business model.
Lawyers representing Old Glory denied the allegations and demanded Neugebauer's attorneys remove the company from the lawsuits in a June 24 letter. Old Glory's lawyers also said they would file a motion for dismissal and seek "additional remedies" if necessary.
Others accused of scheming against Neugebauer also rejected the allegations in his lawsuits.
"To say we are unconcerned about the lawsuits filed in Delaware and Georgia is a massive understatement," Chase Potter, an attorney at Iacuone McAllister Potter PLLC who represents Ayers, said in a statement.
"The bankruptcy court stayed these actions," Potter continued. "If that stay is ever lifted, and the decision is made to continue pursuing the lawsuits, we not only intend to vigorously defend against the claims and win — we intend to seek sanctions."
A spokesman for Ken Griffin called Neugebauer's allegations "fabricated nonsense."
Potential path forward
The proposed settlement between Neugebauer and the bankruptcy trustee includes a "joint prosecution agreement" in which the trustee would join Neugebauer as a plaintiff and the parties would split any awarded damages.
Neugebauer said the agreement would allow his complaints to move forward to the benefit of the estate and himself and came after he was deposed by the trustee's lawyers. He characterized the agreement as both sides working together to prosecute the claims against GloriFi's backers.
But Davor Rukavina, an attorney representing the trustee, said in a statement to Dallas Business Journal any assertions that the trustee joined Neugebauer's side or agrees with the accusations in his complaint are "incorrect."
There are other parties interested in the remains of the company. Attorneys for Rick Jackson's Jackson Investment Group, one of GloriFi's creditors, filed an objection on July 29 asserting that the settlement amounted to a sale and did not allow for other parties to make an offer. The trustee has been working toward a sale of the estate but Neugebauer's lawsuits and the legal actions of others involved in the case have disrupted the process.
Jackson's attorneys argued his offer "will be higher and better" than the one proposed by Neugebauer. The attorneys also described Neugebauer's claims in his lawsuits as "meritless and not supported by independent credible evidence."
"The settling parties are pursuing baseless claims against innocent investors who did nothing more than invest," Jackson's objection said. "These baseless claims are being used by the settling parties to hide their own responsibility for the fall of the company."
Judge Michelle Larson expressed frustration with all of the parties involved in the case as she weighed the path forward during the Aug. 1 virtual status conference.
"I believe that once again folks are playing a big game of chicken," Larson said. "This case reeks of legal tactics, which the court does not find attractive."
In the end, the judge instructed all parties to make their best offer to the trustee by noon on Aug. 5. Jackson Investment Group submitted a bid, according to court documents. The trustee will have three days to make a decision on which offer to move forward with ahead of a hearing scheduled for Aug. 15.
"It's time to put your money where your mouth is," Larson told the attorneys representing all of the involved parties. "It's time to put up or shut up."
