Co-Founder of Fintech Startup Settles for $6,000,000

Zachary Martinsek and Jason Wilk were founders of a fintech startup called Dave, Inc. Dave was a company that used a proprietary algorithm to predict overdrafts from members’ linked bank accounts and make small, non-recourse loans to its members in order to avoid costly overdraft fees. Martinsek was the first employee of the company and the first work on the proprietary algorithm, the likes of which had never been previously seen. Dave, Inc. continued to expand and moved its headquarters from Ohio to Los Angeles, where Martinsek and Wilk worked together to help build the company. Martinsek’s compensation package included the vesting of certain shares of Dave, Inc. stock, which amounted to 676,874 shares pursuant to a Restricted Stock Purchase Agreement of January 25, 2017.  Later in 2017, Martinsek and Wilk had a falling out, which led to Martinsek leaving the company and foregoing additional share vesting. On December 13, 2017, counsel for Dave, Inc. purported to rescind Martinsek’s 676,874 previously vested shares. Dave, Inc. had the right to repurchase Martinsek’s shares pursuant to the Restricted Stock Purchase Agreement for approximately $1,600.

Martinsek made overtures to Dave, Inc. and its CEO Jason Wilk to challenge this rescission, but these efforts were unsuccessful, leading to Martinsek retaining counsel and filing the underlying action for: (1) Breach of Contract; (2) Breach of Fiduciary Duty; (3) Conversion; (4) Breach of Implied Covenant of Good Faith and Fair Dealing; (5) Declaratory Relief; and (6) Treble Damages Pursuant to Penal Code 496(c).

Plaintiff contends that his 676,874 shares were duly vested and that Plaintiff’s shares were not subject to the unilateral rescission by Dave, Inc. and Wilk. Plaintiff contended that the purported rescission constituted a conversion of his 676,874 vested shares, entitling him to damages for the conversion, including civil penalties pursuant to Penal Code 496 and punitive damages. Plaintiff contends that Dave, Inc. never exercised its right to repurchase his shares under the Restricted Stock Purchase Agreement.

Defendant denied all allegations. Defendant rescinded Plaintiff’s shares and thus alleged that Plaintiff was not a shareholder in Dave, Inc. Dave, Inc. alleges that it repurchased Martinsek’s shares after his separation pursuant to the terms of the Restricted Stock Purchase Agreement.

Alan Romero, of Romero Law, APC, represented the plaintiff in this matter that resulted in a $6,000,000 settlement.