Muzik Connect, a headphones company with a slew of famous investors, is being sued by an investor who claims the company is covering up “serious misconduct” in an effort to “take advantage of its celebrity shareholders.”
According to court documents obtained by The Blast, DHPC Technologies claims they are a minority equity holder in Muzik since 2018.
After they became a minority equity holder, DHPC claims they became concerned about “the management and operations of Muzik.” They claim they were concerned about Muzik’s claims regarding a series of “product launches.”
DHPC also claims they were worried about financial issues as well, particularly “potential breaches of fiduciary duty stemming from the lack of board and shareholder oversight” and “excessive compensation and abuse of travel expenses at the executive level.”
In the course of their investigation, DHPC claims they became aware of the “suspicious departures of two high-ranking executives.” When they tried to speak with those people, DHPC claims Muzik “flatly refused to permit any contact by citing severance agreements that contain impermissibly broad and restrictive covenants” which would prevent them from “furnishing even truthful information to a shareholder.”
DHPC says they believe Muzik is “engaged in a long-term Ponzi-type scheme of taking investors’ money without a bona fide attempt or effort to actually develop a product and bring it to market.”
They say they also believe that Muzik is “taking advantage of its celebrity shareholders who, upon information and belief, are less attentive to their investments than institutional investors or funds.”
DHPC is seeking a court order ruling the non-disparagement clauses of the former execs is unenforceable and should be thrown out so that can continue their investigation into Muzik’s business practices.
A spokesperson for the company tells The Blast, “We don’t comment on pending litigation.”
According to a Forbes article from 2018, celebrity investors in Muzik include Michael Jordan, Drake, Kevin Hart, and Tony Robbins.
The company also announced last month they were working on a line of headphones with Cardi B and Offset.
Me and Offset are coming out with our own headphones with our partners @MUZIKconnect …what style would you guys like ?
— iamcardib (@iamcardib) July 24, 2019