Deel reportedly faces DOJ criminal probe over spying allegations

The US Department of Justice has reportedly launched a criminal investigation into Deel, according to The Wall Street Journal. The probe marks a major escalation in the ongoing legal battle with its rival, Rippling, and reportedly focuses on allegations that Deel hired a corporate spy to leak information on its competitor. Deel, an HR and payroll startup, has denied the allegations, stating that it is “not aware of any investigation. We will always cooperate with the relevant authorities and provide any necessary information in response to valid inquiries.”

The conflict began as a civil dispute in the US. Rippling sued Deel in May, and revised the suit in June, alleging that its rival planted a corporate spy who confessed in an Irish court. Rippling’s ongoing lawsuit charged Deel with violations of the RICO statute (a federal racketeering law), characterizing the company as a criminal syndicate. Deel has countersued Rippling, alleging spying by impersonating a customer, and has dismissed Rippling’s legal actions as a smear campaign. Deel also referred to the confessed spy as a paid witness after Rippling agreed to cover his legal and travel expenses, adding that the truth will win in court.

The legal battle intensified at the end of November when Rippling obtained bank records. The records indicated that Deel transferred funds to the wife of its COO, who then transferred the same amount to the confessed spy just 56 seconds later. In response to the escalating dispute, Deel CEO Alexandre Bouaziz, who was characterized as the mastermind of the plot in Rippling’s lawsuit, has retained defense lawyer William Frentzen. Frentzen is a partner in Morrison Foerster’s white-collar defense (a legal practice area for financial and corporate crimes) group and formerly worked in the U.S. Attorney’s Office for the Northern District of California. Rippling is represented by Alex Spiro, a former prosecutor for the Manhattan District Attorney’s Office and a partner at the white-shoe law firm (a prestigious, established firm) Quinn Emanuel.

Despite the legal turmoil, both companies continue to secure funding. Their respective financials include:

• Deel: Valued at $17.3 billion in October after raising $300 million led by Ribbit Capital and Andreessen Horowitz.
• Rippling: Valued at $16.8 billion in May after raising $450 million from investors including Elad Gil, Goldman Sachs Alternatives, and Y Combinator.

Why it matters

The escalation from a civil dispute to a potential criminal investigation marks a significant turning point in the high-stakes rivalry between two of the HR tech sector’s most valuable companies.