What’s going on with Greenwood and The Gathering Spot?

When Greenwood, a neobank that courts Black and Latino customers, acquired The Gathering Spot last year — a networking and coworking club that targets similar demographics — the fintech’s co-founder Paul Judge described the merger as a “Black on Black” deal, saying it was “two companies that are Black-owned, strengthening each other.”

A little over a year later, however, all that hope and goodwill has vanished.

Ryan Wilson, the CEO and co-founder of The Gathering Spot (TGS), has sued Judge, Greenwood co-founder Ryan Glover and the fintech itself, alleging Greenwood and its founders did not pay Wilson and former TGS shareholders the earn-outs promised in their purchase agreement, that the fintech refused to pay bonuses to TGS employees, and more. Wilson is claiming he and his fellow TGS shareholders are owed a $5 million earn-out payment and other considerations.

In turn, Greenwood has denied the claims and in its countersuit alleged that TGS’ founders misrepresented their finances, which led to unforeseen obligations over $27 million.

Wilson declined to comment. Glover and Judge did not respond to requests for comment.

Moreover, Greenwood reportedly revealed over the weekend that TGS co-founder T’Keel “TK” Petersen is leaving the company and his role as COO of TGS. Soon afterwards, Greenwood announced the hiring of Mike McCloskey as its chief financial officer. TGS later clarified in an Instagram post that Petersen’s departure is unrelated to McCloskey’s hiring.

The turn of events hasn’t been received well by Black professionals who were part of the TGS community.

What went wrong?

At the outset, both TGS and Greenwood appeared not only to share a very compatible demographic focus, they also seemingly shared the ethos. Greenwood was founded shortly after the murder of George Floyd as a banking platform for Black and Latino communities. The Gathering Spot was founded in 2016 as a networking platform and coworking hub for people from underrepresented backgrounds.

The companies both purported to help minorities achieve generational wealth and financial freedom through entrepreneurship and networking. According to one of Wilson’s complaints, Greenwood’s acquisition of TGS created the nation’s largest fintech and community platform meant for minorities. So, when Greenwood acquired TGS, reportedly for $50 million in cash and stock last year, it felt almost like kismet.

But that dream is now turning into a sad reality.

The first cracks in the relationship came to light in late February, when Wilson filed a complaint against Greenwood, alleging the company engaged in “intentional misconduct to breach its purchase agreement,” thus breaking its contract.

Greenwood filed a countersuit in June, saying Wilson, Petersen, and TSG shareholders misconstrued the contract agreement and disregarded their “own bad conduct that perpetuated the alleged breaches that they complain of now.”

Wilson filed another complaint in July, alleging Greenwood didn’t pay TGS shareholders a $5 million earn-out payment contingent upon meeting a revenue threshold, and refused any bonuses for 2022. The complaint says Judge and Glover then used Greenwood funds to pay themselves “excessive bonuses” as well as make other “preferential transfers to themselves.”

It also alleges that Greenwood missed several deadlines for payments owed to TGS shareholders (which include Valor Ventures, Cameron J. Newton Enterprise, and JAAD Capital) and has refused to make them. Wilson also believes that Greenwood’s failures to pay stem from financial issues and predicts the company will soon become insolvent, according to the complaint.

Greenwood has raised nearly $90 million in funding, most recently at a $325 million valuation, according to PitchBook. Before Greenwood, Judge had a long career as a technical executive, a founder and an investor, and that kind of track record can be music to investors’ ears.

Greenwood’s backers are a who’s who list of major players in the worlds of VC and financial services. They include Bank of America, Citigroup, Fidelity, JP Morgan Chase, Mastercard, Visa and Wells Fargo. Its financial investors include Black Operator Ventures, Lightspeed, and SoftBank’s Opportunity Fund (where Judge is currently chairman), among many more.

The Gathering Spot, meanwhile, has more than 12,000 members with locations in Los Angeles and Atlanta. For his work at TGS, Wilson and Petersen were presented the Phoenix Award, which is the city’s highest honor.

The lawsuit has the Black tech ecosystem worried about the future of the community.

Shila Nieves Burney, founder of Zane Capital, said her heart dropped when she heard of Petersen’s departure. “I am a die-hard fan of what TK and Ryan built, and as I built Zane, The Gathering Spot was my primary meeting location,” she told TechCrunch+. “My hope is that through the acquisition, that community isn’t lost. We are already stinging from the loss of TK.”

Kaisean Raines, an entrepreneur who is also a member of TGS, said this situation has evoked a “range of emotions” among her and others in the community.

“We are surprised and disappointed, primarily because the incident reveals gaps in communication and transparency. It’s a stark reminder of how important these aspects are to maintain trust and cohesion within a community,” she said. “On the other hand, it’s also sparked constructive conversations about the need for improvement and the potential for growth. We’re using this as a learning experience and hope it will ultimately lead to a stronger, more resilient community.”