Defamation is a powerful tool, used largely by politicians, businesses and celebrities. Litigation is expensive and often drags on to the point of becoming meaningless. So, the law is out of the reach of most others. But defamation cases make for juicy headlines, especially when the founder of a start-up that has just imploded, files a million dollar defamation suit over an article written by a high-profile venture capitalist (VC).
Ankiti Bose, 31, is the high-flying start-up sensation who made global headlines for her Singapore-based start-up, Zilingo, which offered manufacturing, logistical and technological solutions for the international clothing supply chain. The company rose to dizzy heights and spectacularly collapsed, all in one decade. In May 2022, Ms Bose was sacked by Zilingo’s board of directors, amidst allegations of financial impropriety by her financial backers, who included marquee VC funds such as Sequoia Capital, Tamasek Holdings and Burda Principal Investments. She has denied these allegations and made some serious counter-charges of her own, even sending a legal notice to the board. Based on a whistleblower’s findings, the board had ordered investigations but the reports and findings have never been made public.
In the start-up world, founders remain celebrities long after they have been ousted by their companies—usually after multiple rounds of funding have already made them very rich. Many of these founders are intelligent youngsters who get used to extraordinary amounts of burn-money and a super-rich lifestyle, very early in life. When ousted, some retaliate by writing books, virulent social media posts or, in this case, multiple lawsuits, while the VCs remains silent or speak through anonymous media leaks and are never held accountable even though the losers are often institutions. It is an evolving situation that needs a solution. Here’s what happened in this particular case.
On 28th March, Ms Bose’s lawyers sent a legal notice to Mahesh Murthy, a high-profile entrepreneur, digital marketer, VC and top social media influencer. On 20th April, her lawyer, Nalini Mishra, holding a power of attorney (PoA) for Ms Bose, filed a civil defamation suit in the Bombay High Court (filing No. 11349/2023), which is still to be heard. The suit seeks an apology from Mr Murthy, an injunction restraining him from writing or posting against her on social media, as well as damages to the tune of Rs820 crore.
Ms Bose’s action is against Mr Murthy’s article in Outlook Business magazine (which, contrary to convention, has been made a second respondent) titled, “From Vulture Capital to Victim Capital—How Indian Start Up Founders Turned the Tables on Shrewd Indian Venture Capitalists”. It is a hard-hitting exposé on how the machinations of start-up founders have turned global investors wary. They are ‘not signing cheques in a hurry’ even though $10bn (billion) of venture funding is potentially available for investment, he writes, while also explaining the structure of start-up financing, over multiple rounds of fund raising.
The piece has unflattering references to a whole bunch of start-ups that have been making controversial headlines (Zomato, Nykaa, BharatPe, etc), especially those who listed their companies at incredibly high valuations. Interestingly, Ankiti Bose is the only one who is not specifically named. Instead it has indirect references to ‘one lady… ran a popular fashion portal and took Sequoia's money’ and how she “got her firm to pay her lawyer some Rs70 crore as fees and—it is rumoured—got a lot of that amount directly back to herself as her cut.”
Mr Murthy, as a VC and influencer, indeed, has a wide reach, but the charges he makes about her are not new. What he wrote, and much more, has been reported extensively by national and international publications over the past year. The latest in-depth article on Zilingo’s collapse appeared in Inc42 on 21st April, just a day after the lawsuit was filed in Mumbai. Titled “Inside Ankiti Bose’s Multimillion-Dollar Implosion” (https://inc42.com/features/zilingo-ankiti-bose-multimillion-dollar-catastrophe/), this article lists more serious allegations, along with statements from Ms Bose’s media team. But the precise findings against her, or even the “seven reasons put forward by the board of directors in their notice of termination” to Ms Bose were never made public.
Moneylife itself has been the victim of defamation action by very large, blue-chip entities. They work at silencing criticism through legal action, in addition to employing digital teams and public relations to discredit journalists and publications. Given that charges against Ankiti Bose have been widely reported, the action of singling out one writer should be of interest to media as well as large and small investors in start-ups. Will such action have a chilling impact on less powerful analysts? On the other hand, why is there no pressure on the Zilingo board to make its findings public? Can they level serious charges of fraud and worse without any follow-up action? I emailed a set of queries to Ankiti Bose’s lawyer Pradeep K Jain of Singhania & Co LLP, on 24thApril, to ensure accuracy and clarity with regard to the defamation action. I am summarising the replies to my queries.
On the article not having mentioned Ms Bose: While there is no mention of Ms Bose by name, “there is only one company and founder which answers all the descriptions, including location.” Also, that Mr Murthy had “not responded to our multiple efforts at establishing contact” with him. And he “was on Twitter soon after the news of the suit became public to again allege that Ms Bose (as the party filing the suit) was doing so as a PR stunt.”
On other articles that mention charges against her: Mr Jain said his client is “exploring potential filings (of defamation cases) in other jurisdictions too.” He also claimed the right to initiate selective action ‘within material constraints’ and said that their legal teams “in India, Singapore and US have been extremely successful in having malicious and unfounded content removed” and it will continue to be done more actively and vigorously. He provided a list of actions such as:
“A Cease and Desist order was served to another VC investor, after which they retracted the statement.
Legal notice to Straits Times, after which they removed the offending parts and also issued an editor's note.
Legal notice to a LinkedIn influencer, a CEO (chief executive officer) of a fin-tech company in South-east Asia, whose authored post was removed.
We are in the process of initiating legal proceedings against Inc42 for the contents of the article that you seem to draw a lot of your own questions from (mentioned above).
Of the articles you mention from 2022, most are regurgitation of an article from one global publication and yes we have sent legal notices to them after which they have agreed to amend several aspects of the original copy.”
On Sequoia and the Kroll and Deloitte Reports: Investigations and audits into Ms Bose’s alleged financial impropriety (and her counter-allegations) were conducted by Zilingo’s board through Kroll and Deloitte but have not been made public. On the question of whether legal action has been initiated against Sequoia, which was the main backer of Ms Bose and her firm Zilingo, Mr Singhania says:
“With regard to Ms Bose’s relationship with Sequoia, our team continues to evaluate the situation, but we are not in a position to comment on any specific action at this stage.”
“With regard to the Kroll and Deloitte reports, the Inc42 article that you refer to has a detailed set of responses that Ms Bose had provided to the author. Within these responses, it was detailed that: a) despite multiple attempts at trying to sight the Kroll report, both Ms Bose and us are yet to even see the set of allegations that led to the commissioning of the report, let alone the report itself; b) ditto for Deloitte report.”
On sexual harassment: Adding a new piece of information Mr Jain says, “Ms. Bose had made a number of complaints of an extremely serious nature pertaining to issues of sexual harassment. Despite multiple efforts at seeking to get engagement on dealing with these with the same enthusiasm as the other whistle-blower complaints, we are awaiting acknowledgement of this complaint to this day.”
Ms Bose’s lawyer also sent me the responses provided to Inc42, which have been largely incorporated in the article. He also says that they will “continue to take actions against Mahesh Murthy, or any author or publication that is regurgitating malicious reports from ‘unknown sources’ in a motivated manner to hurt our client’s reputation and represent the ‘vulture capital club’.”
The last bit is again intriguing, since Mr Murthy’s by using the term ‘vulture capital club’ make the point that the industry also has a lot to answer for with the valuation of so many money-burning start-ups nose diving after listing. Also, while Ms Bose’s legal team is aggressively pursuing those who write against her, it seems less enthusiastic about action against the directors and VCs who got together to sack her. In her defence, it must be admitted that most of the information against her that is reported by the media is from anonymous insiders on a no-name basis.
Many start-ups are now sizeable companies with a massive public presence in terms of customers and investors. Can they be allowed to hide behind secrecy when they sack their founders? Or is it time to demand some disclosures after start-ups achieve the hallowed status of ‘unicorns’? Can VCs continue to take the stand that no questions should be asked since it is their private money and they take the risks as well as the losses when an FTX or a Zilingo or Theranos or innumerable crypto and consumer-tech companies fold up? Aren’t these VCs actively involved in pushing for stratospheric valuations of start-ups that crashed after listing on the exchanges? Maybe they condone dubious tactics too, when valuations are being pumped up. After all, they were the only beneficiaries. It is a one-sided situation.
If start-up founders begin to use defamation as a way to silence independent investigation, who will ensure that customers and smaller investors have access to information to track the goings-on in the controversial VC and start-up world? Mr Murthy’s article, which will now face greater scrutiny, has a whole list of fraudulent actions by start-up founders to siphon funds and enrich themselves. If the VC industry cannot keep its eyes open or regulate itself, and is also unwilling to be make better disclosures, such actions will eventually attract government’s notice and lead to a set of regulations. Surely, that cannot be in anyone’s interest. It is time both sides wake up to the need for transparency and disclosures.
With each up round, Diminishing returns set in for future investors. The power of incentives trap many existing investors from speaking up (looking to exit at a higher valuation) and this emboldens the founders of such start-ups. Many of these startups can't generate returns above cost of capital at ANY SCALE as investors have found out with mega platform companies such as UBER. However, there is hope as markets (both public and private) are complex adaptive systems and future Angels and VCs will act as better stewards of capital or else the whole pool will be poisoned.
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