Facebook sued for alleged fraud in buying Israeli startup

Facebook  / Photo illustration: Shutterstock

Servicefriend founder and CEO Shahar Ben Ami is suing for NIS 25 million, claiming Facebook reneged on its commitments.

The founder of Israeli startup Servicefriend Shahar Ben-Ami has filed a lawsuit in the Tel Aviv Labor court against Facebook for allegedly acting fraudulently and with an extreme lack of good faith, when acquiring the company that he founded. Ben Ami, who was fired as CEO in 2020, one year after the acquisition, is suing for NIS 25 million.

Ben Ami claims that Facebook committed to paying him in blocked shares worth millions of dollars, in order to persuade him to sell the startup that he had founded. But after the acquisition was completed, Facebook's attitude towards him underwent an extreme change, until he was fired in contravention, he claims, to the agreement.

High-tech entrepreneur Ben Ami was the main shareholder and CEO in Servicefriend, which he founded in 2015. He developed an innovative AI bot for use by customer service call centers through a communications app including via WhatsApp. The company flourished and was chosen by Gartner as one of the world's most promising startups in the customer service sector. In 2018, revenue doubled to $1.2 million. Servicefriend attracted the attention of Facebook, which sought to acquire it to install its product in the digital wallet project that it was developing.

Facebook tracked Servicefriend's development over three years and in September 2019 acquired it for $13.5 million in cash to its shareholders including Ben Ami and Ido Arad, as well as $10.5 million in blocked shares allocating to the startups development team, which included Ben Ami, and $4 million in blocked shares to distribute among employees and about $2 million to consultants and bonuses to employees moving to Facebook.

Ben Ami received 28,144 blocked shares in Facebook worth $5.1 million at the time, over a period of four years. In addition, it was promised that he would lead the development program for customers in the blockchain project and he would be subject to Facebook VP product Kevin Weil.

The lawsuit filed by Adv. David Fohrer of the Fohrer Levi Orgad law firm and Advs. Ofer Hanoch and Yael Dolev of GKH Law says, "If Facebook had not promised the plaintiff such a senior position and high remuneration for the acquisition of Servicefriend by granting an exceptional amount of blocked shares, worth $5.1 million at the time over four years, during which time the plaintiff would lead the customer service program in the blockchain project - the plaintiff would not have entered into the acquisition deal."

In the lawsuit Ben Ami charges, "Facebook is a tough and predatory company. It operates to maximize its benefits, and pays little heed to the damage it causes to others in the rest of the world. The company's romantic vision helps it create connections with people which is replaced with the image of a cynical, capitalistic and opportunistic company."

"Worldwide evidence is mounting about inappropriate behavior by Facebook from infringing on antitrust laws, through to predatory business behavior to wipe out small businesses including intervention in elections in democratic countries. The plaintiff is one of the people hurt by Facebook's predatory activities and lack of good faith."

Ben Ami claims that Facebook asked to acquire and take control of his early stage and successful company in order to use its technology and prevent others from using it, but after the company was bought, Facebook violated its promises and agreements, and he was fired in October 2020.

Ben Ami recounts that just nine days after signing the sale agreement, Facebook decided that he would not be subject to Weil but rather Dror Oren, who was hired to lead the customer service blockchain project. Ben Aim claims that Oren strove to 'discredit' him in the eyes of Facebook executives and made into a persona non-grata, isolated him before the project began, and prevented him from integrating into the project.

For its part, Facebook claims that there was mistrust in the relations between Ben Ami and the company and so he was asked to quit.

Servicefriend is also currently the subject of an investigation by the Israel Competition Authority, after Facebook failed to report that it had acquired it as well as Redkix, another Israeli company, which develops email messaging.

A spokesperson for Facebook said in response to the report, "This claim is without merit and will be actively defended."

Published by Globes, Israel business news - en.globes.co.il - on April 1, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Facebook  / Photo illustration: Shutterstock
Facebook / Photo illustration: Shutterstock
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