Zenefits Co-Founder Sold Stock Months Before Scandal

buzzfeed.com

20 points·jdkanani··7 comments

I never would have believed it a few years ago, but Buzzfeed has become a force in investigative journalism.

Is it too much to ask that the article go into some detail about why this should bother me as a Zenefits employee? How does this compare to other founders? Would this be a disturbing sign to investors? What is the point of the headline if none of this is going to be discussed?

It insinuates fraud took place.

does it?

Did Conrad know he was breaking the law ("macro", perjurying one's self to insurance regulators, etc) when he sold his stock to someone? Did he disclose this material information?

All signs point to yes for the first question, and no to the second. As a Zenefits employee, it probably doesn't matter much to you. It does matter to whomever bought his stock.

For one, he not only committed insurance fraud by creating a macro & circumventing state insurance regulations, he enabled others to commit fraud as well. The reputational risk to the company could be tremendous. Secondly, by knowing about this then participating in a $10mm sale may constitute securities fraud for witholding material information of the company. This may ultimately lower the valuation of your stock and options. Further, the company may have been valued based on bad information (unlicensed & unqualified brokers) that doesn't accurately reflect the viability of the company.

Insofar as other founders who dumped stock prior to bad news coming out, I can think of Mark Pincus of Zynga off the top of my head.

Awesome for him!

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