Better Home & Finance Holding Co. has filed a federal lawsuit against former CEO and founder Vishal Garg, escalating a battle over leadership of the AI-focused mortgage lender.
Better filed a complaint in the U.S. District Court for the Southern District of New York, accusing Garg of violating U.S. securities laws while running what the board calls an “illegal, scorched-earth campaign” to replace directors and reinstall himself as CEO.
“Garg has launched a scorched-earth campaign to retake control of the Company by surreptitiously cultivating a coalition of shareholders, failing to provide critical updates to the public that the securities laws require, and flooding the market with misleading statements in order to get shareholders to pledge their support for his attempt to reinstall himself as CEO and seize control of the Board,” the lawsuit states.
Garg did not provide a comment at this time.
The lawsuit comes after Better announced on Aug. 3 that Daniel Lewis would succeed Garg as interim CEO. At the time, the company said Garg had “mutually agreed with the Board to transition from his role as Chief Executive Officer” and would “continue to serve on the Board and work closely with Mr. Lewis to ensure an orderly and effective leadership transition.”
But on Aug. 13, Garg announced he was seeking to regain control of the company after claiming he had secured support from shareholders representing a majority of its voting power. Garg retained attorney Alex Spiro.
Better’s board publicly pushed back on Garg’s efforts, citing more than $1.5 billion in net losses since 2022 and a more than 90% stock price decline during his tenure as CEO.
Alleged violations
Better alleges in a 136-page lawsuit that Garg violated Section 13(d) of the Securities Exchange Act of 1934 by organizing a group of shareholders to act in concert without timely disclosure of the group’s formation, membership, arrangements and shareholdings.
Better said it has “incontrovertible evidence” that Garg is not acting alone.
“Within days of his removal, Garg assembled a group of shareholders to act together to carry out his self-serving agenda of removing the majority of the duly constituted Board, replacing those directors with hand-picked successors, and reinstalling him as CEO,” the lawsuit states.
Better claims his group includes “Steven Sarracino and Activant Capital, Tony Bobulinski, Chris Parker, Riaz Valani, and other aggregated current and former employees and smaller shareholders.”
The complaint also alleges violations of Section 14(a). Better says Garg issued misleading communications — including statements that more than 50% of the company’s voting power supports him — and solicited shareholder support without first filing a proxy solicitation statement, as required under federal law.
“After engaging in unlawful solicitation for at least a week and making numerous false and misleading statements to shareholders, Garg finally filed a proxy solicitation statement on August 17,” the lawsuit states. “That belated filing does nothing to cure Garg’s previous improper statements to shareholders.”
The company says Garg’s amended Schedule 13D filed Aug. 17 shows “the ‘group’ as controlling just 13.7% of shares, which Better says is inconsistent with his public claims of majority support.
Better is seeking declaratory and injunctive relief. It is asking the court to rule that Garg violated Sections 13(d) and 14(a); order him to file a complete and accurate Schedule 13D identifying the group and its plans; require corrective disclosures for what Better calls materially false and misleading statements; and bar him from further solicitation until compliant Schedule 13D and Schedule 14A materials are filed.
The company is also asking the court to void any consents or expressions of shareholder support obtained through the alleged unlawful solicitation.
