Tinder co-founders and early employees sue owners Match and IAC

Image: Gabriel Olsen/FilmMagic/getty images

They call it selling out for a reason.

On Tuesday, ten Tinder co-founders and early employees filed a lawsuit against the dating app’s overlords, InterActiveCorp (IAC) and Match Group. The plaintiffs, who include co-founders Sean Rad, Justin Mateen, and Jonathan Badeen, allege that the corporate owners deliberately sought to manipulate the valuation of Tinder, in order to lower the pay-out price for these early employees’ stock options, and that it restructured Tinder within Match to deny them future pay-outs. 

Gibson Dunn is representing the ten plaintiffs.

“Tinder is one of the fastest growing startups in the history of the technology industry,” the suit reads. “This case arises from Defendants’ scheme to cheat the Tinder Plaintiffs out of billions of dollars by violating their contractual rights as option holders.”

IAC denies the allegations. It provided the following (surprisingly sassy) statement to Mashable:

The allegations in the complaint are meritless, and IAC and Match Group intend to vigorously defend against them.

Since Tinder’s inception, Match Group has paid out in excess of a billion dollars in equity compensation to Tinder’s founders and employees. With respect to the matters alleged in the complaint, the facts are simple: Match Group and the plaintiffs went through a rigorous, contractually-defined valuation process involving two independent global investment banks, and Mr. Rad and his merry band of plaintiffs did not like the outcome. Mr. Rad (who was dismissed from the Company a year ago) and Mr. Mateen (who has not been with the Company in years) may not like the fact that Tinder has experienced enormous success following their respective departures, but sour grapes alone do not a lawsuit make. Mr. Rad has a rich history of outlandish public statements, and this lawsuit contains just another series of them. We look forward to defending our position in court.

?, indeed.

The lawsuit says that IAC/Match owes the plaintiffs “billions.” It accuses IAC/Match of installing executives that would make false financial statements, and that the company manipulated media and financial industry reports to further lower stock prices. It allegedly delayed transformative product launches, including Tinder Gold, until after the plaintiffs’ buyout windows. And it reorganized Twitter’s role within IAC, absorbing it into Match, specifically in order to strip the plaintiffs of their options and future selling windows.

A lot of this has to do with Tinder’s 2017 valuation of $3 billion, which the lawsuit alleges is bogus, and was established specifically to minimize the amount that IAC/Match would have to pay out the Plaintiffs for their options. It says that the $3 billion made no sense, since it was the same valuation as 2014, despite astronomical growth. Just one week after the valuation, the suit says that “Match’s market capitalization incrased by approximately one billion dollars.” Additionally, it projected that Tinder would earn $454 million in revenue, while at the most recent earnings call, Mtach said that it was “on pace to exceed $800 million.” 

“Defendants’ admissions of Tinder’s continued explosive growth and financial succcess confirm that their valuation projections in 2017 were a farce,” the suit reads.

If the allegations made in the suit are true, this story represents how a corporation can use corporate re-structuring and disinformation to bilk a tech company’s young, early founders. On the other hand, perhaps IAC/Match really can take credit for differentiating and monetizing Tinder, taking it from a problem-plagued company to a multibillion dollar dating empire. 

We’ll just have to find out in court.