How a Controversial “Uber for Private Investigations” Tech Startup Went Down in Flames … and Fraud
By Christopher Borba
Click here for an editor’s message on Trustify, with some full disclosures.
It was an autumn Thursday in 2018, and Danny Boice, the CEO and co-founder of Trustify, announced to the staff he was heading to the bank to pick up their paychecks. The employees were concerned because their direct deposits hadn’t gone through, and they were starting to wonder if they were working for free.
Boice didn’t return with their checks, that day or ever. Nor has the startup settled its debts to law firms, investors, PR firms, contracted private investigators, or Trustify’s landlord, according to several lawsuit filings.
How did a duo of serial tech entrepreneurs, who had a bold idea to disrupt the private investigations industry, end up in massive debt, accused of defrauding investors and misappropriating company assets? It’s a bizarre story, and one that’s still unfolding.
Gumshoes On Demand
Danny Boice and his wife and business partner, Jen Mellon, launched Trustify (originally under the name “FlimFlam”) on June 1, 2015. By creating an app that allowed people to order vetted, on-demand private investigations services without paying a retainer, they hoped to become the “Uber of private investigations.” In the community of private investigators, it was a controversial idea. But tech investors were climbing on board.
Boice was no newbie to the world of tech startups. In 2012, he co-founded Speek, a free virtual conferencing service, which was later acquired by a Utah tech company. Before that, he launched and sold another startup called Jaxara Group. To get Trustify/FlimFlam off the ground, Boice turned to angel investors and raised over $1 million, according to a 2015 article in the Washington Business Journal. Although he would not disclose the exact amount, he assured them it was seven figures, and he valued the company at $5 million. In a 2015 PursuitMag article, Boice said he came up with the idea for Trustify after hiring a PI during a contentious divorce. “I kind of got taken advantage of,” he told Pursuit. “There’s really not much protection for consumers out there.”
The company’s stated motto was “keeping the world honest.”
Laboring Under a Few Illusions
Trustify did disrupt the private investigation industry, but not in the way Boice and Mellon intended. In researching this story, I spoke with several former employees, none of whom wanted their names associated with the failed startup. Even those who signed on to sub-contract for Trustify now say they had concerns: Some felt that the lack of due diligence could undermine trust between PIs and clients. And many argued that the pricing structure threatened to put small businesses under.
But what really made private investigators angry was that Trustify operated without any private investigation license. Boice argued that his startup was not a private investigation firm, but a broker that linked consumers with investigators. Although their rates frequently changed, according to a former employee, they charged anywhere from $75 to $100 per hour and paid the investigators from $30 to $50 per hour. They operated nationwide and advertised to private clients, law firms, and corporations.
By 2017, it seemed that Trustify was doing exceptionally well. According to a former employee, Boice lavishly decorated the corporate office in Arlington, Virginia (see photos here), and had an assistant, a driver, tickets for professional sporting events, a boat, a boat slip, and a beach house — all of which created a glittering veneer of success. That façade fooled people outside of the company, especially investors (we’ll get to that). But some of the employees had questions.
The House of Cards Collapses
Amidst the architectural splendor of Trustify’s offices, employees began wondering whether the company’s underlying structure was sound. In staff meetings, numbers and sales goals were rarely discussed. The extravagant spending became a sort of inside joke around the office, as were Boice’s screaming matches on the phone with Mellon. And employees became even more concerned after seeing Trustify’s pitch deck to investors, which contained logos of companies such as SCIC and MLB, indicating they were associated with the startup — which those companies most definitely were not.
One employee interviewed declined to provide any revenue numbers but did say if it weren’t for the investors, Trustify wouldn’t be in business — a statement backed up by multiple lawsuits. Eight employees sued Trustify and Danny Boice for unpaid wages; Buckley LLP sued for $246,000 in unpaid legal bills; Dini von Mueffling Communications LLC, a PR firm, sued for over $240,000 in unpaid invoices; and Anchorage Capital, a venture capital firm that invested in the startup, sued Trustify, alleging gross mismanagement and fraud: They accuse Boice of converting Trustify’s assets for personal use, thereby defrauding its stockholders.
Boice engaged Anchorage Capital as a potential investor, and according to the complaint filed for the lawsuit, on May 22, 2017, Anchorage purchased 2,408,599 shares of Series A preferred stock at $1.9721 per share, a total investment of $4,749,998.09. A year later, Boice aimed higher, hoping to raise at least $15 million during the Series B round. The $15 million had to be raised before the round would close and the Series B stock could be issued.
Boice told Anchorage they had a boutique investment bank called Nfluence Partners committed as lead investor, but Anchorage still had concerns that Trustify wouldn’t reach the $15 million threshold. Anchorage told Boice they would only wire funds into the Series B round once the VC firm received confirmation Nfluence had sent their funds.
And then things got extra weird.
Allegations of Fraud, Forgery, and Financial Malfeasance
The complaint states that in June 2018, Anchorage received an email from the investment bank’s managing partner stating that the bank had approved $7.5 million in investment in the Series B round. Based on this confirmation, Anchorage wired $1,957,500.48 to Trustify for 642,292 shares of Series B preferred stock.
After Anchorage wired the funds, Nfluence contacted Anchorage to say they had not invested in Trustify, and their bank did not send the June 2018 email. A further examination of the email domain showed that what appeared to be the bank’s domain name was changed from .com to .co; evidence suggests that the domain name was created by a service called DomainsByProxy at nearly the same time the email was sent. The service conceals the registrant’s identity and even has domain forwarding with masking, which means it sends the .co to the .com address.
The powers that be at Anchorage were convinced the email was forged — which, if true, was an amateurish attempt at spycraft that any competent PI could have bested.
Several months went by without any notice that Trustify met its Series B round of funding (the $15 million). Anchorage asked whether the round would be closed and inquired about the location of their nearly $2 million investment, since the company still had not received any stock. Anchorage heard nothing back from Trustify; Boice and Mellon had gone incommunicado.
In October 2018, Boice released an investor update. According to the complaint, he claimed that Trustify had exceeded their revenue goals and would soon announce in the fourth quarter an addition of $20 million of equity raised. At around the same time, employee’s paychecks started to bounce. The complaint states that in November 2018, Trustify failed to pay its employees at all. Then, in early 2019, Trustify abruptly ceased operations. They did not liquidate their assets, notify investors, or sell the company; they simply stopped functioning, abandoned their plush offices, and changed the locks.
More information surfaced, and Anchorage received documentation indicating that Boice and Mellon had comingled Trustify’s funds for personal use. They also received word from Sovereign’s Capital, another investor, that emails from Trustify’s chief of staff showed Boice transferring $750,000 every year from Trustify’s accounts to his own personal limited liability company. Additional records show Boice purchased a Cape May beach house in August 2017 for $1,275,000, just three months after Trustify received almost $5 million from Anchorage.
Did Danny Boice and Jen Mellon plan all along to defraud investors and spend their money on a beach house, a boat, and a $600,000 documentary film starring themselves? I want to believe they did not, but we’ll probably never know for sure. What does seem pretty clear is that somewhere along the way, they realized the business model wasn’t working and decided to cut their own losses instead of protecting their investors.
Full disclosure: I never thought the market would support the Trustify business model, but I tried to keep an open mind. I believe in giving people a chance. But I never suspected fraud, even as things began to fall apart. It’s sad to think that if the emerging allegations prove true, we’ll never find out whether a business like this — if managed properly — could have succeeded.
In the end, Boice and Mellon probably should have stuck with the original name: FlimFlam.
Pursuit editor Hal Humphreys’s postmortem musings on Trustify, with full disclosures and thoughts on trust.
Our 2015 article on Trustify by Chad Nichols.
About the Author:
Christopher Borba owns Emissary Investigative Group, a Roanoke, Virginia investigation firm specializing in legal investigations.
Speek.com burning down the conference bridge (Washington Business Journal, Aug. 24, 2012. By Bill Flook.)
Speek co-founder lands more than $1M funding for FlimFlam, a private detective app (Washington Business Journal, March 13, 2015. By Kasra Kangarloo.)
Exclusive: Speek gets acquired by Utah-based Jive Communications (Washington Business Journal, June 24, 2015. By Kasra Kangarloo.)
Web site offers direct link between private eyes and the public (The Washington Post, June 28, 2015. By Thomas Heath.)
Should We Trust Trustify? (PursuitMag, Aug. 5, 2015. By Chad Nichols.)
Startup of the Week: Trustify puts a private investigator at your fingertips (Washington Business Journal, Sept. 9, 2016. By Andy Medici.)
This Crystal City Start-Up Has Beautiful Space—and Will Track Down Your Cheating Spouse (Washingtonian, April 13, 2017. By Marisa M. Kashino.)
Former PR firm sues Trustify for unpaid bills (Washington Business Journal, Dec. 12, 2018. By Andy Medici.)
Trustify’s unpaid bills are mounting, ex-employees say (Washington Business Journal, Jan. 2, 2019. By Andy Medici.)
Former employees sue private investigation firm, CEO over unpaid wages (Washington Business Journal, Jan. 11, 2019. By Andy Medici.)
Trustify investors ask court to appoint receiver (Washington Business Journal, March 22, 2019. By Andy Medici.)
Anchorage v. Trustify, Verified Complaint and Petition for Inspection of Books and Records, Appointment of a Receiver/Custodian, and Entry of a Status Quo Order (Court of Chancery of the State of Delaware)
Trustify faces lawsuit amid investment disappearance (AXIOS, March 25, 2019. ByDan Primack.)
Chatterjee assistant at center of fraud lawsuit (E&E News, March 28, 2019. By Rod Kuckro.)
Trustify CEO Danny Boice breaks silence in new Medium post (Washington Business Journal, March 29, 2019. By Andy Medici.)
Buckley Tangles With PI Startup Over $246,000 in Unpaid Legal Fees (The National Law Journal, April 17, 2019. By Ellis Kim.)
The $2M email: Trustify investor claims it was tricked by forged email (Washington Business Journal, April 24, 2019. By Andy Medici.)
And one more interesting new development:
CommuniClique founder arrested, faces felony charge (Washington Business Journal, June 6, 2019. By Andy Medici.)
[From the above story: “Andrew Powers, the founder and CEO of communications technology firm CommuniClique Inc. … had been a longtime member of the Greater Washington tech community. He is listed as an executive officer, director and promoter for Speek Inc., a conferencing call startup founded by Danny Boice, according to a 2014 Securities and Exchange Commission filing.”]