Technology investors in Connecticut and Texas say they never received stock they bought in a digital currency startup that has a Silicon Valley pedigree, a mailbox in the Cayman Islands and a little-explained connection to South Carolina.
They say they bought millions of shares from a California tech mogul who’s angling for a comeback after amassing a nine-figure fortune in the early days of the internet – and losing it. Since they say they never got the stock they paid for, they filed a lawsuit in federal court.
And yet the only defendant they name is a man from Charleston.
The company in question is Uphold Inc., a startup that boasts the enormous success of its founder, Halsey Minor, a Virginia-born tech entrepreneur who made hundreds of millions of dollars as a founder of CNET. The company shaped the early days of online news and advertising and became an early empire of the internet.
Minor’s new startup, initially founded under the name Bitreserve, has likewise promised to reshape finance by building a simpler and more stable way to exchange currencies, including cryptocurrencies like bitcoin. Its executives envision the possibility of new products made possible by reinventing money and how people think about it.
The prospect got the attention of the Connecticut investment fund Outpost Capital Management and the Texas asset manager Bill Laggner, who say in federal court filings that they decided to collectively buy almost a third of Halsey’s stake in Uphold. Terms weren’t disclosed, but the investment is likely worth upwards of $20 million.
They say they paid and that the shares never arrived. So they decided to sue, and they took aim not at Minor, but at Robert Prioleau, the founder of a Charleston web design agency, who was apparently handling some administrative work for him.
Since Minor launched the company in 2014, it’s had a little-understood connection to Charleston. The lawsuit filed last month in U.S. District Court here offers a new twist in that relationship, even if it does relatively little to explain the ties.
Uphold has repeatedly said it is headquartered here, even though it only lists offices in California, London, Portugal and Shanghai. In federal securities filings, it listed an address in the Cayman Islands – a mailbox on Grand Cayman, in a law office where some 19,000 companies are said to be registered.
It appears to have filed incorporation papers in South Carolina under the name Uphold HQ Inc., but the address it gave belongs to a law firm in Columbia. The company doesn’t have a business license with the city of Charleston, and it doesn’t appear in property records in the tri-county area. And while its employees say on LinkedIn that they work all over the U.S. and around the world, none of them says they live in the Lowcountry.
The only time the company has gotten much attention in South Carolina is when it said it was leaving. In May, after a state senator filed legislation similar to North Carolina’s “bathroom bill,” Uphold put out a press release saying it was moving its headquarters to Los Angeles. Anthony Watson, its London-based CEO, called it a “difficult decision,” even though no one seemed to know the company was here.
So the lawsuit filed here offers the first concrete connection between Uphold and Charleston. The strength of that tie is disputed.
The investors say that Prioleau, a founding partner of the Charleston design studio Blue Ion, managed a trust for Minor that controls his stake in Uphold, and they allege that Prioleau didn’t move the shares they bought.
Outpost and Laggner say they want their shares – or damages. Court filings don’t say how much the 9.7 million shares cost, but it was likely a fairly hefty sum: Watson told investors in a January letter that the company had reached a valuation of $2.06 a share, which would value the investment at close to $20 million.
Michael Scardato, the Charleston attorney representing Outpost and Laggner, declined to comment.
But Prioleau says in legal filings that he doesn’t have the right to transfer the shares, though he reviewed the sale and acknowledged that Outpost and Laggner had paid up. And his lawyer says that while Prioleau had done some “strictly limited administrative” work for Uphold, he’s not involved with them anymore.
“He had no involvement with those who have filed a lawsuit in federal court in Charleston and knows nothing about the facts alleged in the complaint,” attorney Andy Gowder said in an email. He described Prioleau’s work with Uphold as “an accommodation to acquaintances in that company.”
It’s not clear whether his acquaintance was Minor, who’s made a name as a Silicon Valley entrepreneur and investor. His fortune began with CNET.com, which he founded in 1993 as a technology news site and grew into an early internet empire, with hands in advertising, e-commerce and software downloads. The company eventually sold to CBS in 2008 for $1.8 billion.
He followed that up with investments in Salesforce.com, now a public company worth more than $48 billion; the music streaming service Rhapsody; and GrandCentral Communications, which was sold in 2007 to become Google Voice.
In 1999, Fortune magazine listed him as one of the 40 richest people under 40. He was 34, and worth $354.9 million.
But the fortune he built in tech faltered elsewhere. The Virginia native amassed a lavish collection of art, hotels, horses and homes like Carter’s Grove plantation, a historic landmark in Williamsburg, Va. Much of it later found its way into the hands of auction houses and new buyers, and he declared bankruptcy in 2013.
So the company then known as Bitreserve was pitched as a rebound for his up-and-down career. Profiles in Bloomberg and the San Francisco Chronicle presented him as something of a comeback kid, and in his letter to shareholders, Uphold’s CEO hearkened to Minor’s early successes, saying his new venture could transform money in much the same way CNET helped reinvent the publishing industry. The company says it’s processed more than $1 billion in transfers.
That future would run through Charleston, somehow, though it’s not clear how. An Uphold spokeswoman declined to comment on the lawsuit and didn’t answer questions about the company’s ties to the Lowcountry.
Gowder, Prioleau’s attorney, also declined to elaborate on the company’s South Carolina ties.
“I really cannot elaborate other than to say that Robert’s duties had nothing to do with Charleston other than the fact that Robert lives here,” he said.
Still, Uphold might well make an appearance here after all, if only for a little while. U.S. District Judge Richard Gergel said this month that if the case goes forward, a trial could begin in Charleston as soon as October.