The Rippling/Deel spying scandal may have taken another wild turn

The Justice Department has reportedly opened a criminal investigation into human resources and payroll startup Deel over allegations that it hired a corporate spy to leak information about its largest competitor, Ripling, according to the Wall Street Journal.

In an emailed statement to TechCrunch, Deel said it was “not aware of any investigation. We will always cooperate with the relevant authorities and provide any necessary information in response to valid inquiries.”

Bayan Dale then makes his own allegations against Riebling. She points to her lawsuit alleging that her competitor was engaged in a “smear campaign,” claiming to have a market advantage over the competitor, and adds: “The truth will prevail in court.” Ripple declined to comment.

This is arguably the biggest drama between two HR startups ever.

To recap, Rippling sued Dell in May, then revised the suit in June, alleging that its competitor planted a corporate spy. A Rippling employee was caught in a sting operation and confessed to being a paid Deel spy in an Irish court through a written sworn statement that reads like something out of a Hollywood movie. The employee testified that he took Rippling’s sales data, product roadmaps, customer account information, names of star employees, whatever was asked of him, and delivered it to Deel executives.

Riebling’s lawsuit, which is ongoing, accuses her rival of violating the federal racketeering statute (known as the RICO statute and commonly used against organized crime) among other laws it cited. But despite the use of phrases like “criminal syndicate,” this was a civil lawsuit, not a criminal trial.

Deel countered Rippling, and also alleged espionage by impersonating an agent, among other claims.

The spy lived in fear

The man who admitted to spying agreed to testify in Riebling’s case, and Riebling agreed to pay him his legal and travel expenses, according to the man’s cooperation agreement released as a court document and seen by TechCrunch. Dale now calls the Rippling man a “paid witness.”

But the man also returned to court claiming his family were living in terror because he believed men from Deal were following him. Dale’s lawyer initially denied this but later discovered that Dale had hired the surveillance.

Pay the spy

Rippling’s latest win came at the end of November, when it obtained the bank records. Records indicated that Deel transferred the funds to an account held by the wife of Deel’s operations manager, and 56 seconds later that account transferred the same amount to an account held by the confessed spy.

Meanwhile, another court document shows that Dell founder and CEO Alexandre Bouaziz, called the “mastermind” of the espionage plot in Riebling’s lawsuit, has hired high-profile attorney William Frentzen to represent him. Frentzen is a partner in Morrison Forrester’s Administrative Personnel Defense Group and was previously chief of the Corporate and Securities Fraud Unit in the U.S. Attorney’s Office for the Northern District of California.

Rippling’s attorney is none other than Alex Spiro of the white-shoe law firm Quinn Emanuel. Spiro is a former prosecutor for the Manhattan District Attorney’s Office and is known for his outsized personality and long list of celebrity clients, from Elon Musk to Jay-Z.

So it all sounds like the plot from a John Grisham novel, with a little “suits” thrown in on top.

None of this stopped investors from backing Deel or Rippling. In October, Deel announced it had reached a valuation of $17.3 billion after raising $300 million led by Ribbit Capital and Andreessen Horowitz. Rippling reached $16.8 billion in value in May after raising $450 million from investors such as Elad Gil, Goldman Sachs Alternatives and Y Combinator.