A lawsuit spanning over a decade has come to a conclusion with a New York jury finding Vishal Garg, CEO and founder of Better.com, guilty of breach of fiduciary duty and conversion in a case brought by his former partner, Raza Khan. Garg has expressed his intention to appeal the verdict.
The court has ruled that Garg must pay $5.5 million to Educational Investment & Finance Corporation (EIFC), the company that he and Khan established in 2009. This amount includes $2.3 million for breach of fiduciary duty, $2.2 million for conversion, and $1 million for punitive damages.
These funds will be utilized to settle the firm’s debts, including those owed to the Internal Revenue Service (IRS). Garg has stated that he is listed as a creditor due to having loaned a substantial amount to the business.
During the trial, which took place in the New York Supreme Court in Manhattan from May 6 to May 17, Garg was not held liable for unjust enrichment. However, Khan, who initially sought $100 million in damages, was found to be accountable for conversion as well.
The civil litigation originated in 2013 when Khan filed a lawsuit against Garg, accusing him of transferring funds from EIFC and Embark, companies they co-founded, into his personal account or to third parties without consent.
Garg and Khan, who had been friends since their high school days at Stuyvesant High School and college years at New York University, established EIFC in 2009. The company specialized in asset management and advisory services for private student loan portfolios and was a shareholder in Embark, a company focused on college application software.
Regarding the outcome of the case, Garg mentioned, “Raza and I grew up like brothers in Queens, and went to high school and college together. We were best friends when we started this business. We should have kept better books and records.”
Despite the legal battle, Garg will continue to lead Better.com. The parent company, Better Home & Finance Holding Co., has witnessed improvements in mortgage production and revenues in the first quarter of 2024. However, the company still faces financial challenges as expenses rise.
Recent changes in leadership at Better.com include the appointment of mortgage industry veteran Chad Smith as president and chief operating officer.
James Kleimann contributed reporting
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