Facedrive fracas heats up as company confirms it filed suit against its co-founder

ridesharing

Toronto-based ride-sharing startup Facedrive said September 8 that it is “aware of certain allegations circulated concerning the company’s long-term plans,” and confirmed that it had filed a statement of claim against the co-founder of the firm over alleged insider trading.

The statement from the embattled company came two days after Imran Khan, the co-founder and former president of Facedrive, alleged the company could be facing insolvency proceedings.

“Management currently has numerous strategic paths available to it that are under consideration.”

Facedrive said its management team will continue to consider all strategic transactions and possibilities in determining what is in the best interests for itself and its shareholders.

“Management currently has numerous strategic paths available to it that are under consideration. However, management has made no determination in respect of any of the potential paths nor has it presented any such alternatives to the board,” Facedrive asserted.

The statement appeared to be a rebuttal of Khan’s allegation that Facedrive’s lawyer contacted his legal counsel to inform him that Khan’s presence might be required for an initial hearing in a liquidation proceeding for Facedrive under the Companies’ Creditors Arrangement Act (CCAA).

“My counsel was further advised that the decision to file under the CCAA had not yet been made by Facedrive’s board,” Khan wrote.

In its claim filed in the Superior Court of Justice of Ontario against Khan and ISRR Holdings Inc., Facedrive alleges – though the allegations have not yet been proven in court – that between July 29, 2021 to August 21, 2021, Khan sold a total of 491,300 common shares of Facedrive and benefited from the sale in excess of $3.5 million with knowledge of material facts communicated to him on a confidential basis in the necessary course of business.

In accordance with s.134(4) the Securities Act (Ontario), Facedrive’s claim seeks Khan and ISRR Holdings to be accountable to Facedrive for any benefit or advantage received as a result of the applicable transactions.

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Facedrive also alleges Khan violated a share lockup agreement.

Khan could not be reached for comment, and it was not clear at time of publication whether he had filed a statement of defence.

In a statement of his own released on September 7, former Facedrive CEO Sayan Navaratnam – who resigned from the company on September 1 – alleged that Khan’s sell-off of his shares have “had a dramatic impact on the stock value, and has caused it to trend negatively almost every day thereafter.”

According to Navaratnam, Khan has sold hundreds of thousands of shares, earning millions of dollars, and that as of last week he learned that Khan intends to divest a further 786,000 shares.

Facedrive’s shares on the TSX Venture Exchange have dropped from a high of $60 to $1.78 as of September 8.

In the spring of 2021, the Ontario Securities Commission’s Corporate Finance Branch opened a continuous disclosure review on Facedrive dating back to 2020. Facedrive was asked to provide “clarifying information” about its Foodora asset acquisition, the HiRide acquisition, a consulting agreement with US medical device company Medtronics as well as the status of Facedrive’s early-stage and non-revenue generating “projects” during fiscal Q2 and Q3 2020.

Photo via Unsplash

Charles Mandel

Charles Mandel

Charles Mandel's reporting and writing on technology has appeared in Wired.com, Canadian Business, Report on Business Magazine, Canada's National Observer, The Globe and Mail, and the National Post, among many others. He lives off-grid in Nova Scotia.