The former boss of the one-time tech unicorn Ve Interactive has been accused of making “materially incorrect and misleading statements” when he and a colleague obtained a short-term loan.
David Brown, a jazz pianist who became a flamboyant entrepreneur, and Martin King, his right-hand man, are being sued in the High Court by Bank and Clients, a small lender.
The bank claims Ve, a developer of software for online retail, borrowed £2.2m for which Brown and King provided personal guarantees. It says the sum was never repaid. Bank and Clients is demanding £4m, including legal costs, fees and interest.
Brown and King said Bank and Clients’ “ridiculous allegations” were all “strenuously denied”.
The claim dates back to last October, when Brown was feted as one of the most successful start-up bosses in Britain. At the time Ve commanded a £1.5bn valuation, making it a unicorn — the name for a company worth more than $1bn.
Advertisement
Bank and Clients says Brown and King asked for a short-term loan on October 28 because they needed working capital but did not want to raise equity, which would have diluted Ve’s shareholders. As Ve was loss making, personal guarantees from its bosses were a “cornerstone of the transaction” for the bank, according to court papers.
Bank and Clients says Brown presented himself as a “very wealthy” individual with assets worth £366m, including 123.5m shares in Ve and a £2m house in Spain. It says King held himself out as being worth £93m, with a collection of supercars and personalised licence plates valued at £14m.
The bank lent £2.2m to Ve on October 31. It says it had planned to charge a fee of £500,000 but raised this to £1m after it found that Ve had already given security over its assets to other lenders, and that a bank account in King’s name said to contain 3m Swiss francs (£2.3m) was jointly held with his wife, whom he was divorcing at the time.
Ve, which had raised £55m from investors including Sir Elton John’s husband David Furnish, ran into financial trouble in March. It was bailed out by a consortium of existing investors called Treyew, led by Doug Barrowman, the Scottish venture capitalist who is dating Baroness Mone, and Mark Pearson, founder of myvouchercodes.co.uk. They injected £3m, slashing Ve’s valuation to £300m, and pushed out Brown.
After it took control, Treyew called in the law firm Edwin Coe to investigate suspicions of fraud in the Brown era, including allegations that £11.5m of Ve’s money was siphoned off and used to support a network of companies owned by him, his ex-wife and his girlfriend.
Advertisement
Brown has denied any wrongdoing. Treyew failed to raise more from existing investors and Ve went into administration in April. It was bought out of administration for £2m by Rowchester, a vehicle backed by Barrowman and Pearson. Edwin Coe’s work is continuing on behalf of the administrators.
Bank and Clients says it demanded repayment from Brown and King on April 25. It claims it then uncovered “false” or “reckless” promises made by the pair, who “did not intend to comply with the terms” of their personal guarantees.
It says Brown owned 46.5m Ve shares, not 123.5m, and his Spanish property had been bought for €750,000. It claims all King’s supercars had mortgages or hire purchase agreements and Ve was far more indebted than the two admitted.
Bank and Clients, which has no connection to Treyew or Rowchester, asked the High Court for a freezing order on Brown and King’s assets last month.
The judge told the pair they had to give the bank’s lawyers five days’ notice before selling anything worth more than £50,000, but postponed a hearing on a full freezing order and summary judgment on Bank and Clients’ case until later this month.