Details of an extraordinary conversation and confession by CEO Max Mito were outlined in submissions in Federal Court legal action by the Sydney VC, after it successfully applied to freeze the assets of StrongRoom, five directors and the startup’s administrators and receivers, just weeks after investing $10.4 million as part of a $17 million raise.
EVP alleges the Melbourne startup claimed to be profitable, but was in fact losing $800,000 a month, and misled them on debt levels by more than $4 million.
Documents before Justice Roger Derrington in the Federal Court in Brisbane on Thursday said that EVP was “profoundly misled” with the cofounders engaged in “false, misleading or deceptive conduct” and “deliberate fraud” to secure the investment from EVP’s $41 million Opportunities Fund.
An affidavit from fund boss Misha Saul outlined a conversation he had with Mito about the company’s revenue and financial where the cofounder admitted to booking loans and other funds as customer revenue, and conceded the revenue figures “may be inaccurate”, but Mito told Saul he “didn’t intend to mislead you”.
Saul alleges he said to Mito, in the presence of fellow director Rohan Gray, that: “You faked the revenue and customer numbers across different product lines and just walked us through how much of each line is fake versus real. That is...
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