Multi-billion dollar cap table management company Carta is facing criticism after admitting that it misused sensitive customer information to target investors of startup Linear on behalf of its private stock exchange business Carta X.Thank you for reading this post, don't forget to subscribe!
CEO Henry Ward has said that this was an isolated incident in which a single employee violated internal protocols and that only three companies were affected. However, emails and marketing materials sent by Carta, seen by Business Insider, cast some doubt about that characterization.
An unsolicited email sent by a Carta employee late last year suggested shares of several startups were offered on CartaX, including unicorn startups like Airtable, Deal, Navan, Brex, and Flexport. At least two companies on the list seen by Business Insider also use cap table software Carta offers, which helps companies keep track of their shareholders.
In the email, the Carta employee writes that sellers were already lined up for all the companies and were obliged to conduct transactions at the listed prices, which in many cases was more than a 50% discount compared to the companies. Was representing. Recent evaluation.
A spokesperson for one of the companies contacted by Business Insider said they were shocked to learn that their shares were listed for sale, adding that they had not opted into the CartaX marketplace, which Ward called the stock sale. A condition was stated for. The spokesperson requested anonymity because he was speaking on private matters related to his company’s financial situation.
Another company, requesting anonymity, also confirmed that they use Carta’s cap table software.
Other companies contacted by BI either declined to comment or did not respond.
The controversy over Carta’s integration of its cap tables and brokerage businesses focuses on the trove of sensitive information that companies entrust to Carta, including shareholders’ contact information, share prices and transaction data. This information may be used by CartaX to identify and solicit potential sellers of startup shares, which could potentially create a conflict of interest for a company that markets itself as a trusted steward of the information. And also chases commission on brokered deals.
Although Ward has said that the misuse of customer information was a unique incident, many disagree. Adam Struck, managing partner of Struck Capital, which has more than 150 portfolio companies on Carta’s platform, says he finds it hard to believe that CartaX employees would have access to this valuable information and not use it.
“If those controls weren’t put in place, I’m going to operate under the assumption that every sell-side broker on Carta X is using this information to their advantage,” he told Insider.
This is not the first time that the issue of conflict of interest has been raised at CartaX. Lisa Whittaker, former head of corporate compliance at Carta, He said he was fired in 2021 Raising concerns about conflicts of interest and attempting to implement guardrails to prevent this type of situation.
Andrea Lamarie, Carta’s former head of liquidity solutions, who worked on the launch of CartaX, said she was the same way. Was thrown out of the company after raising concerns Regarding legal issues with the platform.