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Krueger sues M+M over five million “missing” shares

Kevin Murphy, February 25, 2016, 12:14:45 (UTC), Domain Registries

Former Minds + Machines chair Fred Krueger has taken the company to court, claiming he’s owed shares worth over half a million dollars.
In a lawsuit filed in Los Angeles this week, Krueger says the shares were promised to him in 2007 but have subsequently gone “missing”.
The suit also names as defendants M+M chief financial officer Michael Salazar and Antony Van Couvering, who until last week was CEO.
Krueger himself was asked to leave the company by its board of directors in May last year.
He was one of the company’s founders in 2007. According to his lawsuit, he was promised 25 million shares, which were to be delivered to his Goldman Sachs account in a batch of 20 million and a batch of five million.
Krueger now claims that Goldman has no record of the five-million batch arriving and that M+M has failed to figure out whether the shares were ever even issued.
His complaint says he paid $400,000 for the shares. Judging by M+M’s current share price, they’re now worth around £437,500 ($609,000).
Krueger says that he didn’t notice the shares were missing until forensic accountants picked over his net worth as part of his 2013 divorce.
The suit alleges breach of contract, negligence, and other claims related to the shares. In total, he’s looking for at least $1.5 million in damages.
It also sheds a bit of light on Krueger’s actions immediately following his May 2015 dismissal from the company.
When he “resigned”, he issued a statement via the company that said among other things “my goal is to keep the vast majority of my shares”.
But within a couple of weeks he had started selling and in a matter of months he had disposed of all of his 104 million shares.
Now, according to his lawsuit, his May 2015 “Exit Agreement” with M+M’s board actively incentivized him to sell all of his shares. It says:

In May 2015, Plaintiff Krueger left Minds + Machines Board of Directors under an agreement Plaintiffs Krueger and Needly made with Minds + Machines Group that if Plaintiff Krueger would sell all of his shares in Minds + Machines Group, Minds + Machines Group would return to Needly all of the stock it was holding in Needly.

Needly is (or possibly was, judging by its web site) Krueger’s side project, a web site content management software company.
Krueger says M+M agreed to pay $800,000 and take 1% of Needly’s shares under a consulting agreement. Now, he says the company is refusing to return those shares, as agreed, until he admits that he’s already sold the five million “missing” M+M shares.
Here’s his complaint in PDF format.
It’s a strange old case, and no doubt a distraction for new CEO Toby Hall, who took over from Van Couvering last week with a pledge to boost sales by focusing more on the registrar channel.

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Comments (6)

  1. Andrew says:

    I wonder if there are any repercussions for stating that he intended to keep the majority of his shares if he actually planned to dump them on the market.

    • Ryan says:

      File a complaint with the overseeing body of the exchange, they will investigate, and prosecute if they deem there was malicious intent to raise the stock price, and dump the stock

  2. BT says:

    This company is a never ending trainwreck of weirdness

  3. Ryan says:

    It all started with .com is dead, now everything they touch is imploding, trainwreck is right

  4. Andrew says:

    Kevin, so I don’t have to read the whole complaint, did Fred say he asked for the shares and they said no, or did he just file the suit?

  5. Bob Banker says:

    It was a bank error. They agreed to not go public with the “error” after further investigation.

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