NewAge’s chapter simply received a complete lot extra fascinating.
Having secured NewAge by way of a Buy Asset Settlement again in August, John R. Wadsworth’s first order of enterprise is suing the corporate’s former executives.
Breach of contract, sabotage for self-gain and extortion. A peek into the downfall of an MLM firm that when boasted $500 million in annual gross sales.
Named Defendants in NewAge’s October seventh lawsuit are:
- Frederick “Fred” Cooper – former NewAge director, co-majority Ariix shareholder previous to merging with NewAge and Kwikclick board of director and CEO
- Mark Wilson – NewAge President, co-majority shareholder previous to merging with NewAge
- Brent Willis – NewAge CEO
- Kwikclick – Delaware company
For reference, NewAge acquired Ariix again in 2020.
Described as a “brazen scheme”, NewAge’s lawsuit accuses the Defendants of failing to guard Ariix’s property post-acquisition. Ariix additionally had main liabilities that weren’t disclosed.
That is alleged to have been in violation of the phrases of NewAge’s acquisition settlement.
Typically talking, Fred Cooper (proper) comes off as a little bit of a tyrant within the Grievance;
Whereas Cooper has no govt function inside the NewAge enterprise, legacy workers of Ariix continued to understand Cooper as having the authority to dictate enterprise selections inside the firm.
This notion was strengthened by Cooper’s frequent presence within the company workplace, and his falsely holding himself out because the Chairman of the Board at his frequent talking engagements with Model Companions past the standard function of a company director. On info and perception, Cooper charged his bills for the appearances to NewAge.
Though Cooper lacked any administration authority, NewAge workers perceived his function as being a “co-CEO” of NewAge together with Brent Willis.
The Defendant’s’ failure to guard Ariix’s property is rooted in giving
an entire copy of Ariix’s ICONN software program to its former worker, Wenhan Zhang, to make use of at Kwikclick.
ICONN was Ariix proprietary software program, owned by Ariix and developed by Ariix personnel at Ariix’s expense.
In or round June 2020, Ariix terminated Zhang, who till that point was Ariix’s Chief Data Officer. After his termination by Ariix, Zhang began a brand new place as Chief Data Officer of Kwikclick.
Nevertheless, even after his supposed termination as an worker of Ariix, Zhang continued to attract his wage from Ariix.
On info and perception, Cooper directed Ariix to proceed to pay Zhang’s wage to be able to profit Cooper’s new firm, Kwikclick.
Cooper instructed Ariix’s software program growth workforce in China to commit a major period of time and a spotlight to growth of Kwikclick software program.
Cooper did this solely for the good thing about his new firm, Kwikclick.
On info and perception, after the merger with NewAge, Cooper instructed Tyler Jones, previously of Ariix and after the merger NewAge’s Vice President, Authorized, to draft and backdate a sham settlement between Ariix and Kwikclick concerning the ICONN supply code.
The sham settlement was not disclosed to NewAge earlier than NewAge acquired Ariix.
At one level NewAge was purportedly incurring a $200,000 month expense to code for Kwikclick.
When NewAge workers questioned whether or not a license settlement with Kwikclick was warranted, Cooper immediately threatened and intimidated the NewAge workers who spoke out towards his plan.
One NewAge govt thought Kwikclick
was a rip-off designed to collect info concerning NewAge’s Model Companions and use that knowledge to construct a brand new, competing MLM..
Nonetheless, in late 2021 and with out Board approval, NewAge entered right into a software program licensing settlement with Kwikclick.
The License Settlement was executed by Willis for NewAge, and Cooper for Kwikclick.
Willis and Cooper knew that Willis had no authority to trigger NewAge to enter into the License Settlement as a result of the NewAge board of administrators had explicitly retained the authority to approve the deal itself and had not offered its approval.
Moreover, KwikClick’s software program was purportedly solely 5% totally different to that of NewAge’s present software program.
The phrases of the License Settlement usually are not normal. They’re extremely favorable to Kwikclick and detrimental to NewAge.
The License Settlement offered that NewAge would pay Kwikclick a licensing charge of $50,000 monthly at some stage in the License Settlement.
The License Settlement additionally required NewAge to pay substantial commissions on gross sales of product by NewAge Model Companions by way of the Kwikclick platform.
Shifting onto disclosures, previous to acquisition Defendants advised NewAge Ariix had $11 million in working capital.
Ariix truly had an $18 million debt legal responsibility.
One fascinating tidbit is the exploration of Cooper, having profited from the corporate’s downfall, shopping for NewAge to keep away from chapter.
Discussions with Cooper finally broke down when he refused to signal an applicable non-disclosure settlement and failed to offer proof of funds or comply with phrases acceptable to the Particular Committee of the Board of Administrators overseeing the sale course of.
What as a substitute occurred was Cooper started establishing Kwikclick because the unofficial successor to NewAge.
In 2022, Kwikclick’s shares started public buying and selling. Defendants Cooper and Wilson started issuing shares in Kwikclick to NewAge executives and high Model Companions and gross sales leaders all over the world.
The NewAge board of administrators weren’t given discover of those items.
On info and perception, Cooper organized for the distribution of Kwikclick shares to NewAge executives and Model Companions as a approach to purchase loyalty and to solicit the enterprise of these executives and Model Companions and to incentivize the executives and Model Companions to advertise the usage of Kwikclick inside the NewAge group.
At an August 30, 2022 Founder’s Membership particular emergency assembly in Orlando, Florida, Defendant Wilson advised the group of key Model Companions that his noncompete settlement and the noncompete settlement of Cooper would expire in November 2022.
Wilson advised the group that as of November 2022, he and Cooper could be “free brokers.” Wilson advised the group that the rest of the group had been additionally “free brokers.”
These statements had been meant to solicit NewAge’s high Model Companions (members of the Founders Membership) to compete with NewAge by working with a brand new enterprise fashioned by Cooper and Wilson in violation of the restrictive covenants relevant to Cooper and Wilson.
Cooper’s plan escalated all through August 2022, with the demand that he and NewAge inventory buyers be “made entire” or else.
On or about August 31, 2022, Phil Lewis (the operations govt previously of Ariix and now employed by NewAge) reported to John Wadsworth that he had spent ten hours with Cooper on August 30, 2022.
Lewis reported to Wadsworth that “the Ariix workforce is mobilizing,” and the “workforce” deliberate to “go away as a bunch” except everybody who misplaced cash on NewAge inventory was made entire.
Lewis additionally advised Wadsworth that if Wadsworth didn’t “make Fred [Cooper] an proprietor,” then Wadsworth would “lose all the Ariix workforce.”
Lewis advised Wadsworth that he ought to surrender 30% of the NewAge enterprise to Cooper or else Wadsworth would lose half of the enterprise when Cooper left the corporate.
Tim Gross sales (proper), cited as a “vital Model Companion for NewAge”, was onboard with Cooper’s plan and personally threatened Wadsworth.
On or about September 2, 2022, Tim Gross sales, a major Model Companion for NewAge, advised Wadsworth that “in the event you don’t make Fred an proprietor, or give Fred the Ariix enterprise, everybody will go away, and you’ll lose half of your funding.”
Gross sales was an early Model Companion for Ariix. Gross sales and his downline Model Companions are answerable for a big quantity of gross sales of NewAge merchandise.
Ishim Benallal (aka Icham Benallal, proper), NewAge’s Normal Supervisor in Europe, kicked issues up a notch with outright extortion.
On September 16, 2022, Benallal advised Wadsworth that every one the European Model Companions would depart NewAge if Cooper and Wilson weren’t made majority homeowners and controlling shareholders within the firm that acquired NewAge’s property by way of the chapter course of.
Benallal advised Wadsworth he may destroy NewAge’s European enterprise in three days if he needed to.
In a presentation to NewAge’s European Model Companions, Benallal exhorted them to “take out your telephone now and join Kwikclick; do it now!”
Benallal additionally advised Wadsworth that Cooper had given him 6 million shares of Kwikclick, so he would now not must work if he didn’t wish to.
NewAge’s Grievance sums up the allegations above as being “made on the course or urging of Cooper and Wilson and for his or her private profit.”
And this after all got here on the expense of NewAge, which was successfully left rudderless heading into chapter 11.
NewAge’s lawsuit accuses the Defendants of:
- tortious interference with contractual relations (Cooper, Wilson, Willis and Kwikclick)
- breach of fiduciary responsibility (Cooper, Wilson and Willis throughout three separate counts)
- breach of contract – merger settlement (Cooper and Wilson)
- fraud – merger settlement (Cooper and Wilson)
- fraud – license settlement (Cooper and Kwikclick)
- breach of contract – license settlement (Kwikclick)
- aiding and abetting a breach of fiduciary responsibility (Kwikclick)
- violation of the Defend Commerce Secrets and techniques Act (Cooper, Wilson, Willis and Kwikclick)
- misappropriation of commerce secrets and techniques (Cooper, Wilson, Willis and Kwikclick)
- breach of contract – covenant to not compete and to not solicit (Cooper)
- breach of contract – covenant to not compete (Cooper and Wilson)
- tortious interference with contractual relations (Cooper, Wilson, Willis and Kwikclick)
- conspiracy (Cooper, Wilson, Willis and Kwikclick)
- unjust enrichment (Cooper, Wilson, Willis and Kwikclick)
- imposition of constructive belief – fraud (Wilson, Willis and Kwikclick)
NewAge can be in search of a declaratory judgment as to possession of Kwikclick’s software program, alleging it owns the source-code.
Down from an all time excessive of $7, Kwikclick shares are at present buying and selling at $2.
As alleged in NewAge’s Grievance;
Cooper nonetheless owns roughly 53.4% of the excellent shares of Kwikclick.
Till roughly September 2022, Cooper acted because the CEO of Kwikclick.
In or round September 2022, Cooper resigned as CEO of Kwikclick.
Kwikclick’s former web site area now redirects to “kwik.com”, suggesting the corporate has rebranded.
The “kwik.com” personal area registration was final up to date on June thirtieth, 2022. Kwik’s official FaceBook web page was arrange in October 2021.
As tracked by SimilarWeb, Kwik’s web site visitors is a bit far and wide; 6,700 visits in July, 30,000 in August and 18,200 in September.
All of that visitors is cut up throughout France, Italy and Israel. This seems to be Icham Benallal at work:
Assuming Cooper, Wilson and Willis don’t wimp out with a settlement, that is shaping as much as be a very fascinating case to observe play out.