Carta scandal

Extracted Attributes

• Key Figure

  Henry Ward (CEO of Carta)

• Consequence

  Closure of Carta's secondary market business in 2024

• Primary Cause

  Unauthorized use of confidential customer cap table data for secondary market sales outreach

• Industry Themes

  SaaS business models, data privacy, software pricing power, and network effects

• Initial Accuser

  Karri Saarinen (CEO of Linear)

• Impacted Business Unit

  CartaX (Private stock exchange)

Timeline

• Linear CEO Karri Saarinen publicly accuses Carta of using confidential data to solicit secondary sales of Linear shares. (Source: Web Search (John Rossman))

  2024-01-05

• TechCrunch and other media outlets report on the unethical tactics allegations and growing customer backlash. (Source: Web Search (TechCrunch))

  2024-01-07

• CEO Henry Ward responds to the incident, initially blaming a single employee for violating internal procedures. (Source: Web Search (John Rossman))

  2024-01-08

• Axios reports that Carta still faces significant unanswered questions regarding its data privacy practices. (Source: Web Search (Axios))

  2024-01-09

• The 'All-In' podcast (Episode 161) discusses the scandal, critiquing Ward's response and the future of SaaS. (Source: Document a7a96b3e-b0a7-41e7-a179-b42068a2117b)

  2024-01-12

• Carta officially shutters its private stock exchange, CartaX, following the data misuse scandal. (Source: Wikipedia)

  2024-01-31

Carta (software company)

eShares, Inc., doing business as Carta, Inc., is a San Francisco, California-based technology company that specializes in capitalization table management and valuation software. The company digitizes paper stock certificates along with stock options, warrants, and derivatives to allow companies, investors, and employees to manage their equity and track company ownership. The company also operated CartaX, a private stock exchange, which was shuttered in 2024. Carta was founded in 2012 by Henry Ward and Manu Kumar.

Web Search Results

• Carta Problems

  Carta, a once prominent fintech company known for its cap table management and valuation services, has come under scrutiny due to a series of controversies and legal challenges. The company has faced multiple allegations, including toxic workplace culture, unethical business practices, and significant leadership issues. This article provides a summary of these alleged problems from credible media outlets and other forums. We recommend that you do your own research and form your own opinion. [...] Allegations have emerged that Carta misused confidential client data for its own benefit, specifically in the context of secondary market transactions. Carta is alleged to have accessed both private investor and limited partner data of clients for sales. This has raised serious concerns about the company’s data privacy practices. () ## 4. Legal Battles [...] Carta has been accused of unethical practices, including unauthorized solicitation of secondary sales from investors without permission and running a “boiler room” sales organization. These actions allegedly breached client trust and data privacy, leading to public backlash from several startup founders and fund managers. ## 3. Violating Confidential Information

• Carta still has a lot of explaining to do - Axios

  The big picture: This was the right move by Carta, which provides cap table management software for most VC-backed startups in the U.S., even if borne of scandal. But there are still a lot of unanswered questions. Backstory: The move came just two days after a salesman for Carta was discovered to have used confidential customer data while trying to arrange a private stock sale.

• Carta, the cap table management outfit, is accused of ...

  For Carta, the unflattering attention is the latest in a stream of bad publicity. It has been so constant that in October, Ward even emailed customers, telling them that if they are concerned about “negative press” tied to the outfit, they should read a Medium post of his. The move appeared only to call more attention to the many reported problems plaguing the company. [...] The strategy has boosted Carta’s valuation in recent years. But a prominent customer is now accusing Carta of misusing sensitive information that startups entrust to the company in pursuit of its own goals. The claim is raising wider questions about how Carta operates, even as Carta argues the incident was isolated. [...] interested party at a specific price, though this buyer might be willing to “flex higher,” said the Carta employee in an email.

• Carta (software company) - Wikipedia

  The company also operated the CartaX private stock exchange, a way for employees and shareholders to sell their stocks before the company goes public or is acquired. Business Insider referred to the company "the NASDAQ for private companies" before the exchange was shut down in 2024, following a customer data scandal. [...] eShares, Inc., doing business as Carta, Inc., is a San Francisco, California-based technology company that specializes in capitalization table management and valuation "Valuation (finance)") software. The company digitizes paper stock certificates along with stock options, warrants, and derivatives "Derivative (finance)") to allow companies, investors, and employees to manage their equity and track company ownership. The company also operated CartaX, a private stock exchange, which was

• Carta Destroys Trust and Enterprise Value - by John Rossman

  The post kicked off concerns about whether Carta had improperly accessed confidential company data through its primary business of managing startups’ cap-table information—and whether it was a systemic problem at Carta or the actions of a single employee. Carta co-founder and CEO Henry Ward wrote on X that he blamed the incident on an employee who “violated our internal procedures and went out of bounds reaching out to customers they shouldn’t have.” [...] However, this business model raised concerns about conflicts of interest and privacy, as Carta has access to sensitive data through its cap table management services. When it was alleged that Carta used this data to initiate secondary market transactions without proper consent, it highlighted the potential for misuse of sensitive information. [...] Carta’s struggles began last Friday (when Karri Saarinen, the chief executive of software startup Linear, posted on LinkedIn that Carta was using information about his company’s investor base to attempt to sell its shares to external buyers without the company’s knowledge or consent, which would violate Carta’s agreement with customers.