Backblaze is dismissing allegations from a short seller that it engaged in “sham accounting” that could put the cloud storage and backup solution provider and its customers’ backups in jeopardy.
On April 24, Morpheus Research posted a lengthy report accusing the San Mateo, California-based firm of practicing “sham accounting and brazen insider dumping.” The claims largely stem from a pair of lawsuits filed against Backblaze by former employees Huey Hall [PDF] and James Kisner [PDF] in October. Per LinkedIn profiles, Hall was Backblaze’s head of finance from March 2020 to February 2024, and Kisner was Backblaze’s VP of investor relations and financial planning from May 2021 to November 2023.
As Morpheus wrote, the lawsuits accuse Backblaze’s founders of participating in “an aggressive trading plan to sell 10,000 shares a day, along with other potential sales from early employee holders, against ‘all external capital markets advice.’” The plan allegedly started in April 2022, after the IPO lockup period expired and despite advisor warnings, including one from a capital markets consultant that such a trading plan likely breached Backblaze’s fiduciary duties.