Medialab Bought Up Imgur, Genius and Amino. Why Are They All Suing?

Medialab has created a surprising online empire by acquiring struggling startups. Some of these companies include Genius, which is a website for music lyrics, and Imgur, a site for sharing images. After buying these companies, Medialab filled their websites with advertisements to make money.

However, while doing this, Medialab has also faced many legal problems. Several of the companies they bought have filed lawsuits against Medialab. These companies say that Medialab did not keep the promises they made when they bought them.

The founders of Imgur, Genius, the social network Amino, and the mixtape website Datpiff have all taken legal action against Medialab in the past three years. They say that Medialab, a company based in Santa Monica, California, did not keep its promises after buying their startups.

One of the investment funds that helped pay for these deals has also filed a lawsuit. They claim that Medialab lied about how much money it was making. Additionally, there are more lawsuits that say Medialab did not pay its suppliers on time.

In October 2023, the lawyer for Amino’s parent company, Narvii, wrote a document for the court.

“MediaLab has engaged in a pattern and practice of refusing to pay companies that it has contracted to pay, including in asset purchases, using contrived reasons in an improper business pattern and practice”

In January 2020, the founders of Amino said that Medialab agreed to pay $17.5 million for their app. They received $10 million right away, and the rest was to be paid later. However, the Amino founders claim that Medialab did not pay the remaining amount and tried to cancel the deal. Amino, Narvii, and the founders did not comment on this matter. Medialab also did not comment and has not yet responded to the ongoing lawsuit.

This situation is similar to a case involving Tom Lehman, the founder of Genius. He filed a lawsuit in Los Angeles, claiming that Medialab did not make several payments as part of the $80 million sale of the rap lyrics website in 2021. Lehman did not comment, and Medialab denied his claims in court documents.

Medialab has faced other legal issues as well. In April 2023, Imgur's founder, Alan Schaaf, sued Medialab, saying they tried to keep his $8 million payment from the sale of the image-sharing site. This case was settled in June 2023 for an undisclosed amount. The Datpiff team also won $400,000 from Medialab in July 2021. Medialab did not comment on these lawsuits.

Medialab was co-founded in 2018 by Michael Heyward and Brad Brooks. They had previously started Whisper, an app for anonymous messaging that raised $40 million in 2014 but later lost popularity. Whisper was known as the “anti-Facebook,” but it faced criticism for allowing online bullying. Medialab stated that Whisper has a strict policy against bullying.

Medialab's other purchases have also faced problems. After buying Whisper in 2019, the company settled a lawsuit over the exposure of sensitive data from 900 million users. They denied any wrongdoing and claimed that users were not promised anonymity. Medialab has also been criticized for its acquisition of Kik, which was called a “paradise” for online predators.

In June 2022, Medialab was involved in a $110 million legal dispute with Corbel Capital, one of its financial backers. Both sides settled their lawsuits in February. Corbel did not respond to requests for comments, and Medialab also declined to comment.

Medialab has faced lawsuits from suppliers, including Mixpanel, which was settled in October 2021 after Medialab allegedly did not pay a $96,000 bill. HTEC also filed a claim for $260,000 in June 2023 over unpaid invoices, and this case is still ongoing. Medialab has not commented on these matters.

In 2021, Medialab claimed its net profits were over $40 million and that it raised $200 million at a valuation of $1.1 billion. This helped attract advertisers like Kraft-Heinz and Remy Martin. However, while the number of monthly users has doubled since 2021, so have the costs of borrowing money. It seems that Medialab has tried to delay payments for acquisitions to meet its debt obligations.

Noted: content collected from the internet.

source: Forbes.