Bay Area tech company Cloudbrink sued by former exec, accused of lying

A Bay Area tech founder has alleged in a wrongful termination lawsuit that his former company and its CEO repeatedly lied to investors, and then fired him for protesting those actions. 

In a lawsuit filed Wednesday in Santa Clara, Subburajan Ponnuswamy, who co-founded the digital security company Cloudbrink in 2019 and served as its chief technology officer, alleged that Cloudbrink CEO Prakash Mana used false information to secure funding from investors. In the complaint, Ponnuswamy alleged that Mana, who joined as CEO in 2020, had conducted a “‘fake it till you make it’ scheme” by falsifying revenue, purchase orders and customer quotes in presentations for investors and board members. He also alleged that Mana promised customers Cloudbrink stock in exchange for helping him falsify the revenue.

In a statement from Cloudbrink provided to SFGATE by company spokesperson Mark Fox, the company wrote that it “affirmatively denies Ponnuswamy’s allegations and will be filing a formal denial in court at the appropriate time.”

“Our policy is not to comment on active litigation; however, we can say that Cloudbrink has an impeccable reputation in the marketplace, intends to vigorously defend itself in this lawsuit, and views the allegations as internally inconsistent and nonsensical. The Board is aware of Ponnuswamy’s allegations and remains in full support of Cloudbrink’s current leadership and direction,” the statement continued.

Ponnuswamy’s filing specifically points out Cloudbrink’s $25 million “Series A” funding round, which the company announced in November 2022; the former executive alleges that Mana used fake customer testimony and false revenue information to raise the money. He alleges that Mana then falsified invoices to assuage investors’ “due diligence” check.

“For some of the falsified revenue and/or customers, CEO Mana did not issue any invoices even after 6 months of claiming the revenue; for other ‘customers,’ CEO Mana created a batch of invoices right around the time of fundraising (months or quarters after claiming those as ARR), just to establish paper trails,” the complaint alleged. “Yet there was no evidence of those invoices ever being submitted to the alleged customer, and no funds were received from them.”

Ponnuswamy reportedly discussed his concerns with Cloudbrink’s board in four meetings with board members, and Mana’s conduct toward the chief technology officer became “increasingly retaliatory,” according to the complaint. Mana allegedly told Ponnuswamy at one point, “If you come into my swim lane, I’ll make sure to take parts of your swim lane.” Mana also asked Ponnuswamy to create fake user and customer accounts, which Ponnuswamy refused to do, according to the lawsuit. 

Ponnuswamy alleged in the complaint that his forced exit came after he met in March with board members and representatives from The Fabric and Highland Capital Partners in March. Both companies were listed by Cloudbrink as lead investors in the $25 million funding round. The complaint said Ponnuswamy “presented hard evidence of falsification of [annual recurring revenue] and customer count.” 

Two weeks later, the Cloudbrink board told Ponnuswamy that “while it appeared to be true that CEO Mana had been reporting fraudulent customers and revenues to the Board and investors, they could not terminate him for fear it would damage Cloudbrink’s sales operations and customers,” per the lawsuit.

Ponnuswamy alleged that the board then told him they would be firing him instead, and that they planned to “‘clean up’ the books.” Then they terminated his contract, the complaint reads. His last day was March 20.

“It became clear that the Company had decided to cover its tracks and side with CEO Mana’s unlawful ‘fake it till you make it’ scheme over lawful business practices,” the complaint reads. 

Ponnuswamy wrote in a statement to SFGATE that “high-profile cases like Elizabeth Holmes and Sam Bankman-Fried are just the tip of the iceberg, with similar unlawful practices in smaller startups often going unreported or inadequately investigated due to company board complicity.” Two investors named in the lawsuit from The Fabric and Highland did not immediately respond to SFGATE’s requests for comment.

Ponnuswamy alleges he was fired in retaliation and wrongfully terminated, without being provided the stock options he’d been promised.

“In effect, CEO Mana and the Board waited for Mr. Ponnuswamy to build the technology and ship product, careful not to issue any additional promised options, […] diluted his options, and terminated him because he repeatedly raised concerns about the Company’s
unlawful and fraudulent conduct,” the complaint said. Ponnuswamy is seeking lost wages and punitive damages, among other relief. 

This is a breaking news story.

Hear of anything happening at Cloudbrink or another Bay Area tech company? Contact tech reporter Stephen Council securely at [email protected] or on Signal at 628-204-5452.