Sequoia Capital recently sent a letter to a select set of its portfolio firms informing them that the firm Algo Legal, formed by former Sequoia General Counsel Sandeep Kapoor, had stopped working with them.
Kapoor joined Sequoia Capital as General Counsel in 2010 and served as the firm’s legal department’s leader for nine years, until March 2019. He formerly held positions at Intel and Luthra & Luthra (later rebranded as L&L Partners).
After an inquiry of a portfolio company discovered “concerning incidents” involving Kapoor’s firm and linked parties, Sequoia cut connections with Algo Legal.
Sequoia has also severed links with Quant Legal Tech, Themis Associates and connected firms, and OneDelta Technology Solutions Private Limited, all of which are linked to Kapoor.
what is the Origin of controversy and “concerning incidents”?
According to trustworthy sources, Kapoor threatened some Sequoia portfolio businesses with criminal charges for violating the Foreign Exchange Management Act (FEMA), as well as investigations by the Income Tax Department, the Enforcement Directorate (ED), and other government agencies. The majority of new businesses received standard Goods and Services Tax (GST) letters and were involved in GST-related litigation. These notices were allegedly regarded as a threat of an investigation by the ED or a raid on the startup.
Kapoor was accused of using his previous position as Director Legal of Sequoia Capital to coerce these portfolio businesses into hiring his firm (Algo Legal) or linked entities for all legal services.
Kapoor was said to demand large sums of money in order to get them out of these probes.
After noticing a pattern, some of these portfolio companies filed concerns with their investors (Sequoia and other PE Funds) roughly six months ago.
Algo Legal has removed information about its Partners and Associates from its website as of June 4th.
In response to Sequoia’s letter to its portfolio firms, the firm issued its statement.