The Rippling/Deel corporate spying scandal may have taken another wild turn

The Department of Justice has reportedly opened a criminal investigation into HR and payroll startup Deel over allegations that it hired a corporate spy to obtain confidential information about its most significant rival, Rippling, according to a report from The Wall Street Journal.

In an emailed statement, Deel said it is “not aware of any investigation” and added that it “will always cooperate with the relevant authorities and provide any necessary information in response to valid inquiries.”

Deel’s statement also levelled accusations at Rippling, pointing to its own lawsuit in which it claims the rival company has engaged in a “smear campaign.” Deel said it is outperforming Rippling in the market and added, The truth will win in court.” Rippling declined to comment.

The dispute has quickly escalated into what is arguably one of the most dramatic confrontations ever seen between two HR technology startups.

By way of background, Rippling sued Deel in May and amended the lawsuit in June, alleging that Deel planted a corporate spy within Rippling. According to the suit, a Rippling employee was caught through a sting operation and later admitted to being a paid spy for Deel. The confession was submitted in an Irish court as a sworn written statement that reads more like a screenplay than a legal filing. The employee testified that he handed over sales leads, product roadmaps, customer account information, and details about high-performing employees to Deel executives whenever asked.

Rippling’s lawsuit, which is still ongoing, accuses Deel of violating federal racketeering laws, commonly known as the RICO statute, a law more typically associated with organised crime, along with several other alleged legal violations. Despite the criminal-sounding language used in the complaint, the case itself is a civil lawsuit, not a criminal prosecution.

Deel has responded with a countersuit against Rippling, alleging, among other claims, that Rippling engaged in spying by impersonating a customer.

The spy lived in fear.

The employee who confessed to spying agreed to testify in Rippling’s case. As part of that arrangement, Rippling decided to cover his legal and travel expenses, according to a cooperation agreement released as a court document and reviewed by TechCrunch. Deel has since referred to the individual as Rippling’s “paid witness.”

The situation escalated further when the man returned to court, rt claiming that his family was living in fear because he believed individuals connected to Deel were following him. While Deel’s lawyer initially denied those allegations, it later emerged that Deel had, in fact, hired a surveillance team.

Payment to the spy

Rippling secured a notable development at the end of November when it obtained bank records through the court. Those records allegedly show that Deel transferred funds into an account held by the wife of Deel’s chief operating officer. Just 56 seconds later, the same amount was transferred from that account to one held by the confessed spy.

Separately, court filings reveal that Deel’s founder and CEO, Alexandre Bouaziz — described in Rippling’s lawsuit as “the mastermind” behind the alleged spying scheme — has hired prominent attorney William Frentzen as his legal counsel. Frentzen is a partner at Morrison Foerster and previously led the corporate and securities fraud unit at the U.S. Attorney’s Office for the Northern District of California.

Alex Spiro of Quinn Emanuel is leading Rippling’s legal representation. Spiro, a former prosecutor with the Manhattan District Attorney’s Office, is known for representing high-profile clients, including Elon Musk and Jay-Z.

With its mix of espionage claims, high-powered lawyers, and billion-dollar companies, the dispute has taken on the feel of a John Grisham novel, with more than a hint of the TV show “Suits.”

Despite the legal turmoil, investor confidence in both companies appears undeterred. In October, Deel announced it had reached a $17.3 billion valuation after raising $300 million in a funding round led by Ribbit Capital and Andreessen Horowitz. Rippling, meanwhile, reached a $16.8 billion valuation in May after raising $450 million from investors including Elad Gil, Goldman Sachs Alternatives, and Y Combinator.