According to Business Insider, a three-year lawsuit against fintech unicorn Array by former chief strategy officer Jason Owen has been dismissed by a New York state business court. Owen claimed he was owed up to $70 million in equity, representing a 5% stake in the company, which was valued at nearly $1.5 billion in his lawsuit and last raised funds in 2023 according to Pitchbook data. Justice Joel Cohen ruled that neither Owen nor Array CEO Martin Toha provided clear testimony supporting Owen’s claim of a promised equity grant, noting that “multimillion-dollar equity grants generally are not accomplished by a phone call with your boss.” The dismissal comes after Owen alleged he was fired for raising concerns about Array’s early customers, including company insiders who resold credit data to credit-repair businesses. This case highlights critical issues in startup equity management that extend far beyond this single dispute.
Table of Contents
The Equity Documentation Crisis in Startups
This case exemplifies a widespread problem in the startup ecosystem: the casual approach to equity promises during early growth phases. Many founders and early employees operate on handshake agreements and verbal promises during the chaotic early days of building a company. As companies scale and valuations skyrocket, these informal arrangements become multi-million dollar disputes. The judge’s comment about phone call agreements underscores how common this practice remains despite the enormous financial stakes involved. What begins as trust-based collaboration in a garage or co-working space can evolve into nine-figure legal battles when proper documentation isn’t prioritized from day one.
Broader Fintech Industry Implications
The Array case arrives during a particularly sensitive period for the fintech sector. Regulatory scrutiny is intensifying across credit monitoring, data privacy, and consumer protection services – exactly the markets where Array operates. While the judge didn’t rule on Owen’s allegations about Array’s early customers, the mere mention of credit-repair businesses and data reselling practices will undoubtedly attract regulatory attention. The fintech industry has been grappling with balancing innovation against compliance, and cases like this provide ammunition for regulators arguing that the sector needs closer oversight. For Array specifically, having its name associated with these allegations – even if unproven – could complicate future banking partnerships and regulatory approvals.
The Founder Background Risk Factor
Martin Toha’s previous company, Profinity, settled with the New York attorney general in 2015 over claims of defrauding consumers according to official records. While this history wasn’t central to the equity dispute, it creates additional reputational vulnerability for Array. Investors and partners increasingly conduct thorough due diligence on founder backgrounds, particularly in regulated industries like financial services. A pattern of legal issues across multiple ventures can raise red flags about governance and compliance culture. For Array, which serves banks and credit unions, maintaining impeccable regulatory standing is essential for business development and customer trust.
A Wake-Up Call for Startup Governance
This lawsuit should serve as a cautionary tale for other startup companies about implementing robust governance structures early. Many high-growth companies delay formalizing equity arrangements, board oversight, and compliance frameworks until they’re preparing for major funding rounds or considering IPOs. By then, undocumented promises and informal practices have become entrenched, creating legal and financial liabilities. The Array case demonstrates that waiting until disputes arise to document agreements is a dangerous strategy that can consume years of management attention and millions in legal fees, regardless of the ultimate outcome.
What’s Next for Array and Similar Startups
Despite the legal victory, Array faces ongoing challenges. The public airing of internal disputes and customer concerns could impact future fundraising and partnership discussions. The company will need to demonstrate that its governance and compliance practices have matured alongside its billion-dollar valuation. For the broader startup ecosystem, this case should accelerate the trend toward professionalizing early-stage operations. We’re likely to see increased demand for specialized legal counsel focused on equity structuring and documentation from day one. Venture capital firms may also begin requiring more rigorous governance practices as a condition of funding, recognizing that equity disputes can destroy value even when companies win in court.
