A California agent has filed a lawsuit against real estate startup Compass, accusing the company of engaging in bait-and-switch tactics to lure high-performing agents away from other companies.
The suit filed by former Compass agent J. Gregory Maffei, first reported by Inman, alleges Compass uses “unfair, unlawful and fraudulent business practices.” It seeks $10 million in damages and reimbursement for unpaid commission and expenses, the Real Deal reported.
The Real Deal provides some details on the suit:
Maffei’s suit claims Compass has leveraged “more than $1 billion in funding from venture capitalists to support its ‘bait-and-switch’ tactics and to account for the losses Compass has incurred by overpaying and poaching its competitors’ real estate agents.” The filing was first reported by Inman.
According to the suit, Maffei joined Compass last year after 14 years at RE/MAX Estate Properties in Los Angeles.
Compass offered an “amazing compensation package,” including a $16,800 signing bonus, 90 percent split and a $49,000 “launch” marketing budget to get Maffei up and running, the suit claimed. It also promised restricted stock units.
Maffei claimed Compass didn’t tell him he’d receive restricted stock in the company, not common stock. Restricted stock units are subject to vesting and other restrictions.
Since 2018, Compass has allowed agents to invest commission payments into company stock, which agents hope will be valuable once the company goes public. Having raised $1.5 billion from investors, including SoftBank, Compass hired bookrunners last year to lay the groundwork for a potential IPO.
But Maffei alleged the model is nothing more than an “unlawful Ponzi scheme or a get-rich-quick scheme,” the complaint read. “Compass’ agents were pressured to give up hard-earned money to invest in Compass.”
Previously, Realogy filed a lawsuit against Compass accusing the New York-based company of price fixing.
Compass did not immediately return an email to The Mortgage Note seeking comment on the lawsuit.