Deepak Agarwal is out as CEO of Choxi.com, the e-commerce company he founded in 2010 as Nomorerack.
Just two years ago, Agarwal appeared to be atop the online retail world. His New York-based company had raised over $50 million in venture capital at a post-money valuation of around $400 million, and was claiming $700 million in projected 2014 sales. Not too shabby for a guy who got his start by selling services to Internet porn purveyors.
Today, however, the thing is a giant mess. So much so, in fact, that almost every employee contacted by Fortune directed us to the company’s general counsel, Cliff Schneider.
Schneider, who runs a boutique law firm on the side, acknowledges that Choxi has fallen behind on paying its vendors—not only those who provide retail products, but even its team of outsourced customer service representatives. (Schnieder says that 30 of them are back on the job, although none picked up the customer service line when Fortune rang on multiple occasions.) Moreover, Choxi-specific Internet message boards are littered with user complaints about missing orders.
“We understand that most vendors want to be paid immediately and everyone here is working very hard to address their concerns,” says Schneider, who declined to specify when all outstanding debts would be paid. “This is a pretty common story about a company that burned through a ton of capital to drive top-line revenue and is in the process of raising more money but—as that hasn’t happened as fast as we’d like—has not paid some of its bills on time.”
But the lack of transparency here is pretty uncommon. Schneider will not say if Agarwal remains on the company’s board of directors, nor will he identify any other directors. He also says that the company is currently being managed by a group of individuals with a “good background in restructuring” and that it has “received a loan from current investors”—but will not get any more specific.
The company’s lead outside investor, Oak Investment Partners, says that it did not participate in the loan and that it no longer has a representative on the board of directors. The company’s only other known institutional investor, HTV Industries, has not returned a request for comment.
It also is worth noting that Oak’s investment was led by former partner Ifty Ahmed, who last year fled to India after being charged with defrauding Oak and its investors of tens of millions of dollars. Among Ahmed’s alleged transgressions was leading the Choxi investment without informing his partners that he and his wife already held personal shares in the company.
Schneider says that the company needn’t publicly share information about who is running or backing the business, because “private companies don’t need to discuss those things.”
Perhaps, but there also is an argument that companies in the midst of such management and financial tumult should be transparent with their vendors and customers from whom they are accepting product and credit cards.
Emails to Agarwal were not returned, and his work voicemail was too full to accept new messages.
