Internal strife is casting a shadow over Hyperloop One Inc.’s plans to build the first speed-of-sound transportation network.
On Tuesday, Brogan BamBrogan, half of the duo that founded the startup and its former chief technology officer, filed a lawsuit against his Hyperloop One co-founder, Shervin Pishevar, and three other company leaders as well as the company, alleging mismanagement, breach of fiduciary duty and other mistreatment. Mr. BamBrogan left the company unexpectedly last month, with neither he nor the company giving an explanation at the time for his departure.
A lawyer for Hyperloop One dismissed the lawsuit’s claims as false and said Mr. BamBrogan and three other former executives at Hyperloop One who joined his lawsuit had lost out in a power struggle. “These employees tried to stage a coup and failed,” the company’s outside counsel Orin Snyder, a partner at law firm Gibson Dunn, said, calling the lawsuit “unfortunate and delusional.”
The legal battle is a rare public display of the tension that often exists between technologists and investors in Silicon Valley. Mr. BamBrogan’s suit says the “money men” at Hyperloop One are “turning the company into a marketing-driven exercise, instead of the engineering-driven enterprise it should be,” according to the lawsuit.
Messrs. BamBrogan and Pishevar founded Hyperloop One in 2014 to try to commercialize the idea that billionaire inventor Elon Musk floated in a 2013 paper: transporting people in low-pressure tubes at 760 miles an hour.
Hyperloop One is in a race with competitor Hyperloop Transportation Technologies Inc. to be the first to bring Mr. Musk’s idea to life, and the lawsuit comes less than six months before a scheduled critical test of its technology. Hyperloop One—which has raised about $130 million, according to a company document—said last week that it planned the first test of its technology at speeds faster than 620 miles an hour in the first quarter of 2017. That comes after it first tested its propulsion technology in the desert near Las Vegas in May. Mr. Musk’s SpaceX is hosting a competition later this year to select the best vehicles for Hyperloop networks.
Messrs. BamBrogan and Pishevar came from different professional backgrounds. Mr. BamBrogan was previously an engineer at Mr. Musk’s Space Exploration Technologies Corp., known as SpaceX, while Mr. Pishevar co-founded venture capital fund Sherpa Capital. Their pairing of financial and technological expertise underpinned the startup’s potential.
But divisions within the tech darling started as early as 2014, according to the lawsuit. The suit says Mr. Pishevar and Joe Lonsdale, a co-founder of venture-capital firm Formation 8 Partners and board member of Hyperloop One, hired Mr. Pishevar’s brother, Afshin Pishevar, as general counsel that year and hired Mr. Lonsdale’s brother’s investment firm in 2016 despite their not being the most qualified for their respective roles. A person close to Hyperloop One said the two men were qualified.
The lawsuit names as defendants both Pishevar brothers and Mr. Lonsdale, as well as Rob Lloyd, Hyperloop One’s chief executive. Shervin Pishevar, Afshin Pishevar, and Messrs. Lonsdale and Lloyd didn’t respond to requests for comment.
Mr. BamBrogan and his fellow plaintiffs are seeking monetary damages, an apology from the defendants and reinstatement.
Hyperloop One is closely held, and it isn’t uncommon for startups to hire people with personal connections to company executives. Messrs. Pishevar and Lonsdale control about 78% of the shareholder voting rights for the firm, according to the lawsuit.
In May, Mr. BamBrogan and 10 senior colleagues wrote a letter, included in the lawsuit, to Shervin Pishevar, and Messrs. Lonsdale and Lloyd saying the company was driven by money, not engineering.
“Hyperloop One should be an engineering-led company,” the letter said. “The disproportionate influence that the current ownership structure provides to [Shervin Pishevar and Mr. Lonsdale], especially in light of how they have used that influence, represents a threat to the success of this great company.”
The person close to Hyperloop One said the company had attempted to address those concerns with the letter’s signatories.
Last month, Mr. BamBrogan arrived at work to find what the lawsuit describes as a “hangman’s noose” at his desk. Security footage showed images of Afshin Pishevar carrying rope near the desk around that time, according to the lawsuit.
The person close to the company said the piece of rope was a lasso, not a noose, and that Hyperloop One fired Afshin Pishevar for the prank.
Source: Wall Street Journal