"Mortgages, Fraud Claims, and "Dumb Dolphins"" [Forbes]
But Better’s investors appear to be overlooking a whole lot more than Garg’s scorched-earth management style: Ongoing lawsuits accuse Garg or entities he controls of improper and even fraudulent activity at two prior business ventures, and of misappropriating “tens of millions of dollars.”
In fact, Goldman Sachs, which has invested in three of Better’s funding rounds, spent two years accusing entities controlled by Garg of “flagrant self-dealing.” The bank, which did not invest in the most recent funding round, quietly dropped its legal claims in October. Goldman declined to comment on its relationship with Better and Garg or why it dropped its claims, but presumably, it may see more upside from its stake in Better than what it might collect in court.
Other parties in that dispute, including PIMCO — one of the world’s largest money managers — are still pursuing claims against companies Garg controlled, alleging they siphoned off money owed to investors in a troubled multibillion dollar mortgage portfolio. Meanwhile, a separate group of investors tied to management of the portfolio filed a lawsuit in June accusing Garg and his associates of fraud — a claim that Garg's attorneys have asked the court to dismiss.
Yet another legal battle involving Garg has dragged on for the better part of a decade. His former business partner and college friend, Raza Khan, claims that Garg improperly moved $3 million from a software company the two men started to his personal bank accounts, and then used stolen technology to help build Better. Garg denies those claims and is countersuing, in a dispute so bitter that during a deposition Garg threatened to burn his former friend alive.
Taken together, the litigation raises questions not only about Garg’s past business practices, but also about the origin of Better. He has previously said he launched the company in 2014 with money he saved for a deposit on a house. But one of the lawsuits claims that misappropriated funds were actually used to launch the mortgage fintech. The suit also claims that a venture capital firm where Garg is the founding partner made more than a dozen investments in other tech companies with that money. Patrick Lenihan, a spokesperson for Better, said, “We can’t comment on ongoing litigation, but we are confident that these accusations are baseless.”