Mortgages, Fraud Claims And ‘Dumb Dolphins’: A Tangled Past Haunts Better.com CEO Vishal Garg

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Location: www.forbes.com

Vishal Garg, pictured above in 2007

The $4 billion fintech startup is hurtling towards an IPO. But its volatile leader is fighting multiple lawsuits that could complicate his ambitions.


“HELLO — WAKE UP BETTER TEAM,” writes Vishal Garg, the CEO of Better.com, in an email to employees obtained by Forbes. “You are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS and…DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBARRASSING ME.”

In many ways, Garg, 42, is the archetypal tech CEO: brilliant, brash and mercurial. Though his outbursts have caused headaches for some staffers, and forced others to quit — according to interviews with 19 current and former employees — such concerns have been overshadowed by Garg’s success in building Better, a venture-backed online mortgage originator that just secured a $4 billion valuation.

The New York-based company boasts a fix to the notoriously byzantine home lending process, with a product that offers pre-approval on a mortgage in minutes. Riding the coattails of a white-hot residential lending market brought on by low interest rates and Covid-19, Better has grown exponentially — with more than 2,000 employees hired since the start of the pandemic — and is on track to generate $800 million in revenue this year, according to The Information.

In recent weeks, investors poured in another $200 million, securing Garg's place as one of the world’s buzziest fintech founders, even before news broke that Better may go public next year. “All I can say is the future is coming,” Garg said this summer, months after the company was included on the 2020 Forbes Fintech 50 list.

But Better’s investors appear to be overlooking a whole lot more than Garg’s scorched-earth management style: Ongoing lawsuits accuse Garg or entities he controls of improper and even fraudulent activity at two prior business ventures, and of misappropriating “tens of millions of dollars.”

In fact, Goldman Sachs, which has invested in three of Better’s funding rounds, spent two years accusing entities controlled by Garg of “flagrant self-dealing.” The bank, which did not invest in the most recent funding round, quietly dropped its legal claims in October. Goldman declined to comment on its relationship with Better and Garg or why it dropped its claims, but presumably, it may see more upside from its stake in Better than what it might collect in court.

Other parties in that dispute, including PIMCO — one of the world’s largest money managers — are still pursuing claims against companies Garg controlled, alleging they siphoned off money owed to investors in a troubled multibillion dollar mortgage portfolio. Meanwhile, a separate group of investors tied to management of the portfolio filed a lawsuit in June accusing Garg and his associates of fraud — a claim that Garg's attorneys have asked the court to dismiss.

Yet another legal battle involving Garg has dragged on for the better part of a decade. His former business partner and college friend, Raza Khan, claims that Garg improperly moved $3 million from a software company the two men started to his personal bank accounts, and then used stolen technology to help build Better. Garg denies those claims and is countersuing, in a dispute so bitter that during a deposition Garg threatened to burn his former friend alive.

Taken together, the litigation raises questions not only about Garg’s past business practices, but also about the origin of Better. He has previously said he launched the company in 2014 with money he saved for a deposit on a house. But one of the lawsuits claims that misappropriated funds were actually used to launch the mortgage fintech. The suit also claims that a venture capital firm where Garg is the founding partner made more than a dozen investments in other tech companies with that money. Patrick Lenihan, a spokesperson for Better, said, “We can’t comment on ongoing litigation, but we are confident that these accusations are baseless.”

“I don’t think that he is someone who has come to terms with what he’s done.”

Lenihan declined requests for an interview with Garg. In his written responses to questions from Forbes, he stated: “Lawsuits are an unfortunate fact of life for successful startups and their CEOs.” He singled out Khan, whom he called a “very litigious former friend and business partner.”

As for Garg’s management style, Lenihan said, “Vishal’s leadership record speaks for itself,’’ adding that the CEO is “unapologetic about our efforts to grow and adapt nimbly.”

With Better seemingly on track to shake up the home mortgage market, and closing in on rivals like Rocket Mortgage and LoanDepot, the stakes are high. Better previously raised money in 2019 at a reported valuation above $600 million. Its new funding round and valuation puts Garg on track to becoming a billionaire.

“I think Vishal, [like] a lot of entrepreneurs out there, [is] so desirous of recognition,” says Khan, the former business partner, who was once so close to Garg he delivered a speech at his wedding. “I don’t think that he is someone who has come to terms with what he’s done.”


Born in India, Garg moved with his family to Queens when he was seven. Early on, he displayed both intellect and entrepreneurialism. As a student at Manhattan’s academically competitive Stuyvesant High School, he bought CliffsNotes and books, and then sold them to students at a markup.

“My superpower, I think, I was good at math and good at, like, being able to spot an opportunity,” Garg said in a podcast last year. Another high school venture, he told the interviewer, was buying clothes at thrift stores and reselling them for a profit on eBay. (A Better spokesperson, however, said that wasn’t true as eBay wasn’t founded until after Garg left high school.)

At Stuyvesant, Garg met Khan, another immigrant from India, and in 1995, both enrolled at New York University; Garg studied finance and international business, while Khan got hooked on computer programming through a side job.

Merging Khan’s tech smarts, and Garg’s business acumen, they launched a company in 2000 that grew into MyRichUncle, an online student loan provider that used algorithms to help decide borrowing terms for students. The business started with a $30,000 investment from Khan’s brother, and by 2007 it had grown into a publicly traded company that originated $320 million in loans, making it one of the largest private student loan providers in the country.

Khan says he was drawn to Garg’s ambition, and recalls spending nights discussing philosophy with him at tea houses on the Lower East Side. Though they were close friends, he says their philosophies didn’t always align. “People lie all the time, we should do it more often,” Khan remembers Garg saying in 2001. “I thought he was kidding. But I think part of him, in every joke there may be a little bit of truth."

A spokesperson for Garg says that “a comment made nearly 20 years ago hardly seems relevant.”


Just as the stars seemed to be aligning for the two young entrepreneurs, the financial crisis and Great Recession hit. MyRichUncle couldn’t get the financing it needed to continue making loans and was forced into a Chapter 7 bankruptcy liquidation in 2009.

But in a crisis driven by subprime mortgages, the pair spotted an opportunity. By building on software models developed at MyRichUncle, they believed they could analyze mortgage portfolios and identify loans that were wrongly made — for example, a borrower never had the means to pay off their loan, or the home appraisal was grossly inflated. In those cases, investors could sue the banks that had issued and sold the bad loans, potentially recouping some of their losses.

While the new venture, called EIFC, appeared promising when it launched in 2009, Khan says he began to see signs that the company’s finances — which were overseen by Garg — were not adding up. In 2013, he filed a lawsuit claiming that Garg hadn’t been filing the company’s taxes and that he had improperly moved $3 million to his personal bank accounts.

Their falling-out has devolved into a legal mess, and the one-time friends now only see each other in court. Khan claims the technology he built at EIFC was stolen by Garg’s associates and used as part of Better’s software. Garg has denied he stole money or technology from EIFC and instead claims in court filings that Khan mismanaged the business and stole $400,000, allegations that Khan denies.

The dispute has been ugly. According to court documents, during a deposition in December, Garg turned to Khan and said that he was “going to staple him against a fucking wall and burn him alive.” (Garg later apologized during the session for letting his “emotions run out of control.”)


It’s not just Garg’s college friend who has turned against him. In 2011, an asset manager named Thomas Priore was battling fraud allegations from the U.S Securities and Exchange Commission and was looking to offload his company, which earned fees from managing a debt portfolio consisting of nearly 200,000 residential mortgages — many of which were failing.

Garg saw a potential jackpot opportunity for EIFC. He lined up a group of investors to take over Priore’s firm for about $5 million using a series of companies set up in the Cayman Islands. (Priore later settled with the SEC for $23 million without admitting or denying the agency’s claims that he mismanaged the portfolio).

Part of the strategy was to use EIFC’s software to identify toxic mortgages, then glean huge settlements from the banks that issued them. Once existing debtholders in the portfolio were paid back, Garg and the investment group could pocket the leftover money — about $180 million, according to one estimate outlined in a pitch deck to investors.

Instead, major debtholders, such as Goldman Sachs and global investment giant PIMCO, and then the Cayman Islands investors, would allege they were the victims of what amounted to an elaborate deception.

It started when ongoing payments to the Cayman Islands investment group suddenly dried up in 2014, and they began demanding to see additional financial records. Then, through separate litigation, debtholders made a potentially explosive discovery: Garg appeared to control “side funds” that had received undisclosed money.

According to the trustee representing the debtholders, an entity controlled by Garg had secured toxic-loan settlements from banks. Instead of being used to first pay off the debtholders, and then the investment group, some of the money went to undisclosed accounts Garg controlled, the trustee alleged. Goldman Sachs joined the case alongside PIMCO and echoed the claims, and said some of the practices by entities Garg controlled amounted to “flagrant self-dealing to enrich its owners.”

The total sum that Garg's companies allegedly did not disclose to debtholders remains unclear, though filings in the ongoing case peg the figure in the “tens of millions of dollars.”

“Punish them like they just stole candy from your little sister.”

Goldman and PIMCO declined to comment. A spokesperson for Garg said there “is no reason to comment” because Garg was not named as a defendant in the case. (Notably, Garg is repeatedly identified in court filings as being in control of two entities named as defendants; SEC filings from this past March show he still controlled them at that point. Attorneys for those entities have denied wrongdoing and claim they are actually owed money.)

Members of the Cayman Islands investment group, meanwhile, allege that they were not told about at least $100 million in settlement money, a portion of which they claim to be entitled to. They filed a lawsuit in June accusing Garg and his associates of fraud, withholding payments and creating shell companies that cut them out of ongoing fees. (Attorneys for Garg have asked the court to dismiss the claims.)

That lawsuit also raises questions about the source of Garg’s wealth. The Cayman Islands investors claim their money was withheld just as Garg began making investments through a venture capital firm he founded called 1/0 Capital. Since 2014, 1/0 has poured money into more than a dozen fintech start-ups, including the student lender Climb Credit and Jiko, a banking platform.

The first of 1/0’s investments, according to the suit: A new company called Better.com.


As Garg tells it, Better’s origin story sounds a lot more wholesome, even inspiring. He says he launched the business in 2014 after a failed attempt to buy a home. "My wife was pregnant with our second child and we were still renting,” he told Forbes last year. “We ended up losing a place that we wanted to buy to an all-cash buyer, because our mortgage process was so long and inefficient.”

The concept was appealing: Better would compress the lengthy mortgage process and offer “pre-approval on your mobile phone in about 3 minutes,” using algorithms and third-party data. It would also forgo traditional borrower-paid fees, making it cheaper than many competitors. Once issued, Better would sell the mortgages to Fannie Mae, Freddie Mac, banks like Wells Fargo and other investors. It now earns most of its revenue from those buyers — up to about $10,000 per mortgage, former employees estimate.

Better’s product was a hit with consumers, thanks in part to aggressive marketing and, later, partnerships with the likes of Airbnb and Ally Financial. With such momentum, investors lined up to write checks for the business. Garg closed on a $30 million Series A round in 2016, and then raised another round at a $220 million valuation the next year.

But even as the company notched a $600 million valuation, and then $4 billion, some employees say Garg created a harsh environment with behavior that ranged from belittling staffers who he saw as underperforming to berating managers whose workers only clocked eight-hour days. “If you are not interested in working hard,” he wrote in a Slack channel, “you need to find another place to show up everyday.”


Despite the legal cloud following Garg, key investors appear to be sticking by him, and Better. In October, soon after news broke that Better was negotiating a new funding round, Steve Sarracino, an investor and board member, received an email on behalf of one of the plaintiffs suing Garg.

“You may be interested to know that Mr Garg is currently the defendant in numerous cases,” the email stated, before asserting that more than $100 million had gone missing from companies Garg controlled. It added that Garg had allegedly threatened to “burn alive” his former business partner.

While Sarracino shared the email with Better’s board, the sender received a response from a lawyer at Garg’s venture capital firm, asking what he was “seeking to accomplish here.” Sarracino’s venture capital firm Activant joined American Express, Ally Financial and others in the recent funding round.

Better’s success may explain the investors’ loyalty, at least for the moment: With the public markets in sight, the company says that it is currently profitable and has customers in more than 40 states.

And Garg is keeping the pressure on. In September, a Better executive sent an email congratulating his team on a positive quarter. “Happy Friday!” the executive wrote. “We’ve helped save our customers collectively millions.”

Garg wasn’t impressed, declaring that the customer experience was still lacking and that his employees weren’t pressing a title insurance partner hard enough. “You need to press your [partner] to the point of breaking, then break them. Break them,” he responded. “Pls share the aggressive ‘I am going to break you’ tactics.”

Then Garg sent a follow-up: “Punish them. Punish them like they just stole candy from your little sister. And until you fight for the consumer, you aren’t getting my love.”


Additional research by Susan Radlauer.