MONTH-IN-BRIEF (Apr 2018)
SEC Action Highlights Importance of Specific Language in Directors and Officers Insurance for Fintech and Other Startup Companies
By Heather Howell Wright, Bradley Arant Boult Cummings LLP
The founder of Mozido, the fintech startup once claimed to be valued at $5.6 billion, has been named as a defendant in a civil lawsuit filed by the Securities and Exchange Commission (SEC). The complaint names Michael Liberty (and others) individually and also names corporate entities related to Mozido as defendants. The SEC asserts that the defendants engaged in a “long-running fraudulent scheme using multiple fraudulent securities offerings” that “tricked investors into believing they were funding fast-growing startup companies.” This action by the SEC highlights the importance of ensuring adequate directors and officers (D&O) insurance for startup fintech entities and for their directors and officers. In addition, the fraud allegation illustrates the significance of negotiating specific language in the standard D&O fraud exclusion.