Fraud Lawsuit: Ex-Latch Execs "Confidential Witnesses" Against Latch

Executive *******

********* ***** ************** ** ***. **, **** ******* Latch ********** **** “************ *********” *** formerly ****** ** ***** ********** *** the *******, ********* *** *** ********* left **** **** ** **** **** “because ** *** ************* **** ********* LOIs ** *****.”

** ** ******* *** ****** ********** to *** ********* ** * ********** class ****** ******* * ******* ** this ******. ***** **** *** *** named ** *** *********, *** ********* will ****** ** ******* *** *** have ** ******* ** *****.

*** ******* **** ******** ** *** plaintiffs **** ******** *** **** *********** allegations *** **** ***** ******* ** fraudulent **********. *** *** ****** **** already ******** ***** ** *********** ********* ** ****, *** *** ******* ********* ******** two ********** ******* ** ******* ******* by ************ ****** ******** ** ********' warehouses (**** ***** ** “******* ********”) and ************ **** ******.

*** ** *** ****** ********** ********* that **** **%-**% ** *****’* ***** American ******* *** ******** **********, ******* that **%-**% *** **** **** ************ reported.

******** ***** ** ********** ******.******** ******** *** ***** ********, *** latest ********* ******** **** *** *******’* legal ******** *** *** **** ****. Turning *** ******* ****** *** ********* its ***** ***** ** **** ********* than ***********.

** ************ **** **** ** ********* ****. *******, ** **** ****, *** claims **** *** **** *******, ******* the ********* *** *****.

**********

******** *** ****-******* **** ************,***** *********** * ********** **** *** years. ********** ****** ******* * **** ************* ** **** ****, ***** ****** to **** ******* ************ *** **** through ******** ****** ** *******.

** **** ********* **** *** ** its ********* ************* **** ** **** ***** **** to ** ******** "** * ****** of ******** ******* ************ *** ****** relating ** *** ****** ** ***** the ******* ********** *******."

*** ******* *** *** *** ***** restated ********** ** ******* ********** ***** Q1 ****. ** * ****** ** failing ** **** *.*. ********** *** Exchange ********** ****** ************,** *** ******** **** *** ******. *** ***** ***** *** ******* around $* *** ***** ***** ***-****, down ~**% **** ***** $** *** share ** ********* ****.

************, ***** **** *** *******'* ***** accounting ******* *** *** ******* ***, Barry *********, **** ****** *** ** January ****. **** ******* ******** *** been ******* ** ***** ** ********** ***** ** ****.******** *** ******* *** *** ****** executives ******** ** ******** ******** **** investors. **** ****:

• ***** ****** ** *******, $*** ******* Loss *** *** ****
• ***** *** ****** "**** *********" **** 38% "*** ****" ******** *******
• ***** *********** *** ******** ********, ****** Ex-Employees
• ***** ***** ** ***** ***** ***** Admitting "******** ****** *** ******** **************"
• ***** *** ** ****** ***, **** Layoffs
• *****, ***, *** *** ****; ******* Fraud
• ***** **** ********** *** ********** ********

Key ******

*** ******* ********** ***** ****** ********* was ***** ** ********* ******* ***** on ****** ** *** "******* *** entities **** ********* ** ********* ******** Latch ****** ***** ******* *** **, 2021, *** ****** **, ****."

********** ******* **** *****, ************, ********* ***** ********, *** ****** ********** ***** *********"**** ** ****** ** ** **** a ****** ** ********** ***** ***/** misleading ********** ***** *****'* ********, **********, and *******."

************, *** ********* ******* ***** ******* of ******** ******* *********** ******* **** and ****:

• ***** ***-******* ******* ** ****** ("****")
• ****** ******** ** ******* ********** ******* a ****** ** ******* ("******* ********")
• ********** ******* ***** ************

*** **** ********* ** *** **** has **** ******* **** ******** ****** Brennan ** *** ******* ********* ** VP *** ************* ** ******* ** Gersec *****, **************-***** ********** ******.

Confidential *********

*** **** ************ ********* ********** ** the ********* *** ********* ** *******:

• Confidential ******* * ("CW1") initially worked as a Channel ********* at Latch at the beginning of the Class Period and then became Regional **** ********* ** ******* *****.
• Confidential ******* * ("CW2") was vice ********* ** ******* *********** ** ***** during the Class Period. He first joined the Company in August 2018, initially as channel account manager, and also worked in the roles of general manager, Canada and senior director of channel development.
• Confidential ******* * (“CW3”) was director ** ******** ******* ************ and field sales at Latch from January 2018 until July 2019...Later, from July 2021 until March 2022, CW3 was a Latch senior solutions engineer.
• Confidential ******* * (“CW4”) was Latch’s vice ********* ** *****: ***** ******* from February 2020 until June 2022. [Emphasis Added.]

*** ********* *** "****** ********* ** Latch’s ******** ***** *** ******* *********** process" *** **** ********** **** ****** Latch ******** "************ *** **** ** several ********* ******* *** ******* ** premature ********* ******* *** ******** ******** sales **** ***** *** *** ******** completed," *** ********* *******.

Other ***** **********

*** ********* ******** ** ** ****** closely **** ***** ****** ***** ********** who *** ***** ** *** *********. They ******* *********** ******* ******* ***** ***, ********** ********* ** ***** ***** ********, *** *********** ********* ******* *** *******.

**** ******* *** ** *** ** the ***** *********** *** **** *** not ***** ** *** ******** *** comment.

Channel ********

***** ** *** *********, ***, ***, and ***, ******** *********** ***** ******* stuffing. *** *** "********* ***** ** find ******* ******** *** ***** *********** in ******* ********," *** ********* *******.

*** ********* *********:

In ***** ** *** ****, CW3 met with Defendant Mitchell, Ali Hussain, and Scott Anderson, and told **** **** ***** ******** ********* **** *** ***********. Mitchell told CW3 directly that as a startup, Latch had to take risks in how it approached business. Unable ** ********* *** *******, *** **** *** *******.

*** ******** ** ***** ** **** 2021 ** * ****** ********* ********. CW3 ****** **** ***** ** *********, he ***** **** ***** ***, **** the *******’* ***** ******* *******,who **** *** **** ***** *** ******* ** *** ******** ********* ******* ** *** ***** ******. [Emphasis Added.]

*******, *** ********* ** ******* *******-******** practices ** *** ******* ***** ** returned, ********* ** *** *********. ** left *** ******* ***** ** ***** 2022.

***, *** *** **** ********* ** sales *** ***** ******* ***** **** 2022, **** "**** **** ***** ******* hardware **** *** ********* ** * distribution ********* ** **********, ******** ** as ******* ******* *** ******** ** a ******** ** * **** **** buyer," ********* ** *** *********. *** filing *******:

** ****, ********* ** ***, *****offered ******* ******** ******** ********* to take *** ******** *** **** **** ** ***** ********* *******. In CW4’s experience, only 60 to 70% of Latch’s recognized North America revenue represented shipped product, and only 30 ** **% *** ******, ******** ********** *******. [Emphasis Added.]

Latch ********* ******* *******

*** **** ********* ******** ******* ******** through * ******* ****** *** ***** Preferred ******* *******, ** ***. *** program ********** ******** *****-***** ******** **** hardware ** ***** ******* ** ****** quick **********. *** ********* ******* **** in *******:

*****recognized *** ******* **** **** ******** ** **** ** ** *** ******* to the channel partner. But when new orders came in, they began stopping channel partners from shipping from this inventory, instead placing *** ****** so that they could ********* **** *******, ******* *** ******** **** ******* **** ** ********. [Emphasis Added.]

Whiz *****

*** ******** ******* ***** * ******** partner ************ ******** *****, * *******-***** ********* ** ******** for *********** *********, ***** ********* ******** channel ********. *** ********* *******:

**** **** ***** **August ** ********* **** *** *** ***** ********** **** *** ******** ** ***** ** **** ****. In exchange for a loan from Latch to Whiz Cribs, Whiz ***** ******** ***** ******* ** ******** ********* ** ****. According to CW3, even as these were consignment sales, Latch *********** ********** ** ******* *** ******** ** **** ******* ** **** *****. CW3 recalls that Defendant Mitchell was directly involved with the Whiz Cribs deal. [Empahsis Added.]

* ******* **** *** **** ***** no ****** ******** ********** ***** *****. A ***** ****** ****** *** *** company ****** ** ****** ******** ** it. **** ********* ** ******* *************** from *** ******* ** ******** *** did *** ******* * *****.

Misreported **** ******

*** **** ******** *********** ***** ** additional ****** ** ***** ***** ***** allegedly **** **** ****** *********** ** inflate *******. ************, ***** ***** ****** the **** **** ***** **** * channel ******* ** ** *** **** as *** *** *******, **** ****** Latch **** ******** ******* **** ** sold *** ******* ** *** *******, the ********* *******.

** ******, *** ********* *******: "** Latch **** * **** ** * channel ******* *** $*** *** *** channel ******* **** ** ** *** end **** *** $***, ***** ***** record $*** ** *******."

*** ********* ******* *******:

*** **** ******* ********* ** *** CFO ******** ****the ******* ***** *** ********* **** ******* ******* ** *** *** **** *** ******* *** **** *****, but the finance function employees rebuffed him, stating that Latch’s *********** ** * ******* *******’* **** ***** ** *** *** **** ***** complied with accounting principles and policies. [Emphasis Added.]

LOI ***********

*** ********* **** *******, ** ********** reported ** ****, **** *** ******* also ********** ********** ********** "******* ** intent," ** ****, ** *****.

*** **** *** ******* **** *********** to ***** ********* ** ****** **** up ***** ***** ***** ****. *** former ********* **** **** **** **** about **%-**% ** **** **** ********* into ****** *****.

"**** *** ***** ********* *****, ***** recognized ******** ** ******* ******* ** LOIs," *** ********* ******.

What's ** ***** *** *****

** * *******, *** *********** *********** in *** ******* ********* ***** *** chance **** ***** *** ********** **** to *** * ******** ******** ** settlement. ** ***** *** *****, *** details ** *** ******* ***** ******* could **** ******* ********* **** *********** officials ** *** *.*. ********** *** Exchange ********** *** *** ******* **********.

** *** *********** ** *** ******* complaint *** ****, **** ***** ****** the *********** ** *****'* ******** *********** that *** ********** ******** **** *** result ** ************* ******. ******, *** legal ****** ****** * ******* ** several ********** ******* ******* *** **** multiple ***** — ***** ***** ******* not **** ***** *** **** ******** liability *** *** *********** ********.

*************** *** ***** *** ***** ********** in *** *******, ********* ****** *** Schoenfelder, ****** *** ***** ********, *** former ******* *** ***** ********* *** not ***** ** ******** *** ******* from ****. * ************ *** **** estate ********** **** ******* ******, ***** sponsored *** **** ***** **** ***** public, ******** ** *******.

Past ********** ***** *****

** ** *** **** *** ******* the *** ** *** ** ************* Latch ** *** ********** **** ********** or ********-******* ****** ******* *** ******** don't ********* ******* ******* ******. ****** companies ********* ******** ******* **** **** received ********* **** ******* ******** ** quarterly ********* ***********. ***** *** *** submitted * ********* ********** ** *** SEC ***** ** ****.

*** ** ** *** ******* *** current ** ****** ********** ** **** private *** ****** ********* ** ** sanctioned ** ********** *** **** ********** charged *** **** ** ****** ** connection **** ********** *****.

*** *******, ****** ***** **** *** Lay *** **** ******** **** ********* of ******** ******* ** *** ***** stemming **** *** ****** *******'* *** of ********** ****** ** ******* **** and ********* *******. *** **** ***** awaiting ******** ** **** *** ************** ** ***** ** ******.

**** ********, *** ****** *** ** Silicon ****** **** ******* *************** ****** ** ***** ****** ***** ******* ******* ** *********** revenue *** *** *******, ***** ** used ** ***** **** **** $*** million ** ******* **** *********. ** faces ** ** ** ***** ** prison ** * ********** ********* *** December ****.

** ******** ****, *** ****** *** of ******* ****** **** ****************** * **-**** ************ * ****** ** ******* ******* through ******* ********.

Turnaround *************

********** ** ******* *********** ******** **** action, *** *********** ****** ** *** amended ***** ****** ********* ******* **** Latch's ***** ******* ***'* ** ***** or **** ** *******. *** ********* negative ********* ***** ********* **** ********'* effort ** ********** *** ******* ** a ******** ******** ******** ***** *** name ****.***.

What ***** ****

***** *** ****** ********** ***** ** defendants ** *** ***** ****** ******* may **** ** ****** ** *** complaint ** * ****** ****** *** judge ** ******* ** ** ***** grounds. ** *** ******-**-******* *****, ******* judges ****** ******* ******* *** ****** are "*********" *** ** *** **** on *** ****** ** *** ****.

** *** ******* ********* ******** * dismissal *******, *** ******* ***** ******* to ********* *** ***** ********** *********** from **** ***** ** *********** *** trial. ** **** ********, *********** ** the ************ ********* ***** ** *** complaint ***** ****** ** ********* ** obtain ***** ********* ***** ****.