LOS ANGELES–(BUSINESS WIRE)–Community.com, Inc. (“Community”) founders Charles Buffin and Max Levine, and Community’s first investor, Steven Levine, filed a lawsuit on August 20, 2020 against Community and its CEO Matthew Peltier. Plaintiffs allege that Peltier’s breaches of fiduciary duty, fraudulent conduct and securities violations caused them damages in excess of $30 million, plus treble damages, punitive damages and attorneys’ fees.
Community is an app that nurtures more meaningful celebrity-fan dialogue through text messaging. It assigns a phone number to its clients which permits them to use the app to directly text with fans or customers. It has been reported that Community has about 500 artists and celebrities as “Community leaders,” and tens of thousands more on the waiting list to join. Community’s celebrity clients include Ashton Kutcher, Jennifer Lopez, John Legend, Paul McCartney, Amy Schumer, Marshmello, Kerry Washington, Sean “Diddy” Combs, Mark Cuban, Sophie Bush, and Ellen DeGeneres. The Company, which is financially backed by Guy Oseary and Ashton Kutcher, is enjoying enormous success. Community is believed to be raising money at a valuation of approximately $450 million.
After Buffin and Max Levine founded Community, they recruited Peltier to come work at the Company. Peltier eventually took over as CEO. Years later, Buffin and Max Levine left the Company to pursue other opportunities, while still retaining substantial ownership of the Company.
In 2018, Peltier started laying the foundation for the alleged fraud by telling Buffin and Max Levine that the Company was failing and the Company’s shares were worthless. The lawsuit describes how Peltier painted a bleak picture of the Company’s finances through numerous texts and phone calls. Peltier also alluded to having two new founders coming on board but refused to divulge any further details about these individuals.
Peltier eventually gave Buffin and Max Levine an ultimatum: either the Company would go bankrupt and Buffin and Max Levine would lose their entire investment; or Buffin and Max Levine could sell their shares back to Community for about $20,000, which would save the Company from insolvency and at least guarantee them some cash for their investment. Peltier expressed that the shares were only worth a penny a share and that this offer was therefore a “massive” return and a great deal for them. Relying on Peltier, their trusted friend, Buffin and Max Levine agreed to sell about 10% of the Company for $22,002 each.
Within weeks of selling their shares, Plaintiffs began to learn that they had been misled about the financial prospects of Community. They learned the Company was working with Guy Oseary, the superstar Hollywood manager, and Ashton Kutcher tweeted out his Community “phone number” to the public. Peltier had never disclosed that Guy Oseary or Ashton Kutcher were involved with Community. Everything finally came together when TechCrunch revealed in the summer of 2019 that Guy Oseary had become a co-founder and, with Ashton Kutcher, led, through their venture capital firm Sound Ventures, a $35 million investment round into Community.
Per the Complaint, Defendants misrepresented the Company’s financial position and concealed that Community was in the midst of negotiating (if it had not already sealed the deal) this transaction with Ashton Kutcher and Guy Oseary. This investment round valued the Company at approximately $180 million—a far cry from the dire financial picture that Peltier painted for Buffin and Max Levine.
The Complaint further alleges that Defendants’ fraudulent conduct was also directed at the Company’s first investor, Plaintiff Steven Levine, who invested $50,000 in the Company at its outset in return for a 2.5% equity stake. Defendants are now denying that Steven Levine was ever a shareholder.
Plaintiffs are represented by Christopher Beatty, Minh-Van Do and Adam Stillman of Miller Barondess, LLP in Los Angeles. Per Beatty, who is lead counsel: “As alleged in the Complaint, Community, through Peltier, groomed my clients for months with false information about the status of the Company, all while the Company was on the cusp of enormous success. These statements were made so Defendants could bilk my clients out of their stock, which, unbeknownst to them, had become extremely valuable. I am confident the jury will recognize the injustice that occurred here and award significant damages. We are looking forward to our day in Court.”
Miller Barondess, LLP