Cybereason CEO: Mnuchin, SoftBank Pushing Company To Bankruptcy – Source: securityboulevard.com

Cybersecurity vendor Cybereason in November 2024 announced it was merging with competitor Trustwave to create a company better able to compete in the fast-growing and crowded managed detection and response (MDR) space that one analyst firm is expecting to expand from $1.89 billion this year to $8.59 billion by 2032.

However, Cybereason Chairman and CEO Eric Gan now reportedly is suing his company’s top two investors – SoftBank Vision Fund (SVF) and former Steven Mnuchin, the U.S. Treasury secretary during President Trump’s first term – and accusing them of driving the Boston-based vendor to the brink of Chapter 11 bankruptcy.

Gan filed a lawsuit this week in Delaware Chancery Court, accusing the investors of blocking more than a dozen financing plans put forth by Gan and Cybereason’s executive team and board members to preserve their own financial stakes in the company, according to a Bloomberg report.

“This is not just a dispute over financing – it’s a deliberate strategy to preserve financial advantages at the expense of the company’s survival,” Gan said in the lawsuit.

Money is Owed

The lawsuit comes a month before a Cybereason debt to JPMorgan Chase & Co. comes due. The lawsuit claims that Gan has proposed a $150 million financing plan but that Mnuchin and Daniela Llobet, a director with SVF, oppose the proposal, just as they have refused to approve 13 previous funding pitches from Cybereason.

Both Llobet and Mnuchin sit on the Cybereason board.

A SVF spokesperson told Bloomberg in a statement that executives with the investment firm “firmly believe this lawsuit has no merit and will vigorously defend ourselves against these claims.”

Mnuchin’s firm said in a statement that the lawsuit “is completely without merit.”

According to Gan’s lawsuit, SoftBank Group Corp. – which SVF is part of – holds about 31% of Cybereason’s outstanding stock, while SVF has about 20%. Cybereason, which was founded in 2012, raised $200 million in new funding from SoftBank Group in 2019 and another $100 million in 2023, when Gan – then an executive vice president with SoftBank – was named CEO.

Gan and his family office own about 6.8% of shares and Liberty Strategic Capital – Mnuchin’s investment firm – holds about 6.6%, and SVF owns about 20%, according to the suit.

Financially Choking the Company

Gan’s lawsuit said that the two investors not only blocked Cybereason from acting on a financing proposal but also proposed their own financing plan that the CEO said deliberately would have excluded the company’s management, concentrated power in the hands of SVF and Liberty, and precluded Cybereason from raising capital from any entity but them.

It’s unclear if the lawsuit or the actions by SVF and Liberty will have an effect on Cybereason’s planned merger with TrustWave, which is expected to close sometime early this year.

Cybereason at one time what seen as a significant up-and-comer in the cybersecurity scene, with a valuation reaching as high as $3.1 billion, about $850 million in funding, and plans to go public.

A Steep Fall

The company offers an AI-infused platform that focuses on ransomware and protection against malware that includes endpoint detection and response (EDR), extended detection and response (XDR), threat hunting, and mobile defense capabilities. It also works with managed service providers and resales partners to extend its reach.

However, since hitting its heights in 2021, Cybereason has seen its value plummet to about $300 million and has gone through at least three rounds of layoffs, cutting about 300 jobs. The downward slide was a reason SoftBank put Gan in as CEO, replacing one of the company’s founders, Lior Div.