A litigation trustee for bankrupt data analytics company Near Intelligence Inc. has sued New York-based digital ad company MobileFuse LLC in the U.S. Bankruptcy Court for Delaware, alleging a multiyear circular payment conspiracy that cost Near more than $50.7 million.

According to the 10-count bankruptcy adversary complaint, the scheme involved MobileFuse's "round-tripping" of payments from Near Intelligence back to the source in order to inflate Near's apparent value ahead of its planned go-public merger with a special purpose acquisition company.

"No business rationale existed for Near to make such large monthly payments to MobileFuse; nor was there a legitimate reason for Near to calculate payments to MobileFuse based on amounts MobileFuse owed Near," the trustee said.

Nevertheless, a secret agreement involving three individuals at each business saw MobileFuse line up monthly payments totaling $15 million annually by the end of June 2021, and then at least $25 million per year afterward, the complaint said.

"There is no evidence that MobileFuse provided any goods or services to Near beyond the arrangement set forth in the 2020 services agreement," which MobileFuse co-founder and CEO Ken Harlan "had conceded would cost Near less than $43,000 in a 'normal' month," the complaint said.

Near Intelligence declared Chapter 11 bankruptcy in December 2023. Its plan of reorganization was approved last year by U.S. Bankruptcy Judge Thomas M. Horan in Delaware. The complaint docketed on Thursday was filed in the name of Near Intelligence plan administrator and litigation trustee Drivetrain LLC.

Two Near Intelligence executives — founder and former CEO Anil Mathews and ex-Chief Financial Officer Rahul Agarwal — were charged with fraud and conspiracy in August in the U.S. District Court for the Southern District of New York in connection with the allegations. Harlan was also charged with the same counts.

The executives, as well as three others not named in the New York action, allegedly exchanged "fake invoices along with inflated payments" that made publicly traded Near Intelligence's revenues from privately held MobileFuse appear more than 10 times higher, the New York indictment said.

"The managers of Near and MobileFuse repeatedly described the two companies as important strategic partners," the bankruptcy complaint said.

In reality, the bankruptcy complaint said, three managers at each company strategized instead on pumping up Near Intelligence's apparent value — Mathews, Agarwal and President Shobhit Shukla on the Near side, and MobileFuse co-founders Val Katayev and Harlan, as well as its Finance Director Matt Sessanta.

Katayev was aware of MobileFuse's big jump in revenue after the scheme was set in motion, "going as far as to publicly brag about MobileFuse's drastically increased revenue on social media," the complaint said.

Keys to the round-tripping included agreements allowing MobileFuse to use Near Intelligence's data and for Near to use MobileFuse's services, as well as the acquisition by Near executives of a 10% stake in MobileFuse for $2 million "through personal investment vehicles," the complaint said.

The Near Intelligence executives, meanwhile "kept the payment scheme" and related details hidden from others in the company, with Sessanta and Harlan described as helping to "deceive Near's own internal controls and conceal the extent of the Near-MobileFuse relationship," according to the complaint

"The sham payments' sole purpose was to fund MobileFuse's payments back to Near. But MobileFuse actually owed those payments to Near pursuant" to the agreements between the two companies, the complaint said. "Had respondents not caused Near to make the sham payments, Near would have had another $25.67 million in additional cash."

Payments became more difficult to obscure as time passed, the complaint said, noting that banks and auditors began "sniffing around" and asking questions about the Near-MobileFuse relationship.

Those involved allegedly resorted to "misdirection," the complaint said, including wiring sham payments to MobileFuse through commercial foreign exchange MonFX to avoid scrutiny, and using false documentation and postdated agreements.

"One of the more egregious examples was a purported data license agreement between Near and MobileFuse stating that it had been signed and became effective on June 30, 2020. In reality, this document was not created until February 2022, when Agarwal had Near's legal department create an undated draft," the complaint said.

Drivetrain LLC is represented by Bradford J. Sandler, Beth E. Levine and Peter J. Keane of Pachulski Stang Ziehl & Jones LLP, and Eric D. Madden, Brandon V. Lewis and Brian J. Bah of Reid Collins & Tsai LLP.

The bankruptcy case is In re: Near Intelligence Inc. et al., case number 1:23-bk-11962, in the U.S. Bankruptcy Court for the District of Delaware. The adversary case is Drivetrain LLC, as plan administrator of the Litigation Trustee of the Near Intelligence Inc. et al., Litigation Trust v. MobileFuse LLC, case number 25-52298, in the U.S. Bankruptcy Court for the District of Delaware.