Open Letter # 2 to Outbrain Inc’s (Nasdaq: OB) Board of Directors: ‘Unlucky’ and the Bot Fraud Lawsuit

Open Letter # 2 to Outbrain Inc’s (Nasdaq: OB) Board of Directors: ‘Unlucky’ and the Bot Fraud Lawsuit

As the founder of Nubai Ventures, a small business, and unconventional whistleblower, I am calling for an independent and unbiased investigation into Outbrain Inc.’s hiring practices regarding its legal defense. We are primarily concerned with the integrity of the legal proceedings, specifically whether Outbrain has pursued information and strategic advantages over Nubai.

The Board should carefully review the hiring of Yenisey Rodriguez-McCloskey within the context of the initial RICO lawsuit with three different defendants and, later, our fraud lawsuit.

Outbrain Inc., consistent with its pattern of seemingly fraudulent orientation, started its defense with an expression of fraudulent orientation.

On April 29, 2024, it became clear that Yenisey Rodriguez-McCloskey, who represents Outbrain Inc. in our fraud case, was initially approached to represent our interests of Nubai as co-counsel on December 11, 2023. 

She then flipped to Outbrain Inc.

During this engagement, she obtained privileged information about Nubai’s legal strategy and financial situation. Subsequently, she opportunistically chose to represent Outbrain and the individual Co-CEOs in a complex federal RICO case. (Nubai’s original federal RICO case transitioned into a New York Supreme Fraud case by voluntary withdrawal.) This raises severe questions about the fairness and impartiality of her representation and whether Nubai was disadvantaged and obstructed from justice. This ethical orientation by Outbrain and a potential co-conspirator could give rise to additional claims on top of our current New York Supreme Court claims.

Her prior work for one of the individual RICO defendants disclosed only through conversations with my former legal counsel, exacerbates the conflict. Given the complexity of our case and the potential for significant harm from such disputes, the selection of Ms. Rodriguez-McCloskey and her firm appears not just as a mere oversight but as a strategic advantage sought by Outbrain. 

Within the context of the first RICO lawsuit and then the fraud lawsuit, why does Outbrain Inc., a public corporation, need to gain an advantage over a small business plaintiff, cut corners, and load up institutional shareholders with risks?

American Bar Association’s Stance

According to Rule 1.18(c) of the American Bar Association: “A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d).”

This rule underscores the inappropriateness of Ms. Rodriguez-McCloskey’s role in this litigation, given her prior interactions with former counsel of Nubai Ventures. Given her known conflicts, the choice of Ms. Rodriguez-McCloskey out of the myriad available legal professionals in New York is deeply troubling.

Call for an Independent Review

I urge Outbrain’s Board to initiate an independent review of this matter by a genuinely unaffiliated third party. This investigation should assess the ethical breaches involved and evaluate the processes by which legal representation was chosen, ensuring such decisions are free from personal biases and conflicts.

Nubai Ventures remains committed to a transparent and fair legal process. We seek to engage through an independent, un-conflicted intermediary to ensure that our evidence and concerns are handled with the integrity they warrant. It is crucial for the confidence of all parties involved, including Outbrain’s shareholders and the broader market, to address this issue promptly and thoroughly.

Concerns Over Legal Representation and Governance at Outbrain Inc.

The decision by Outbrain Inc. to engage Rodriguez-McCloskey for its defense raises serious concerns reminiscent of the infamous Madoff scandal, where disproportionate professional services were utilized to mask deeper issues within the organization. This analogy is pertinent as Outbrain, a company with nearly $1 billion in annual revenue, opted for a small-scale legal firm that needs to be equipped for the complexities and scale of a RICO case involving primary corporate and individual interests.

Inappropriate Gain of Information Advantage

It is troubling to consider why a corporation of Outbrain’s stature would need to secure an information advantage against Nubai Ventures, a considerably smaller entity. This strategy indicates a more profound, systemic problem within Outbrain’s legal defense and corporate governance approach. By choosing an attorney with prior personal ties to a RICO defendant, Outbrain has potentially prioritized individual over corporate interests, creating a conflict with the broader interests of its shareholders.

Implications for Corporate Governance

Rodriguez-McCloskey’s engagement, given her past involvement with one of the individual RICO defendants, poses a direct conflict of interest. This conflict could undermine the impartiality required of legal counsel representing a public corporation and its shareholders. Such a situation risks the integrity of Outbrain’s defense strategy, aligning it more with personal defense rather than corporate, especially in the context of the initial severe allegations under a RICO claim, then fraud in New York Supreme Court. The pattern of corporate conduct strongly suggest McCloskey was not only brought in to gain advantage over Nubai, possessing privileged information, but also to protect individual interests, over Outbrain the corporation.

Call for Board Action and Oversight

Outbrain’s Board of directors must address this critical issue to restore faith in the company’s ethical standards and legal practices. If Ms. Rodriguez-McCloskey continues to represent Outbrain, it may suggest a board-level endorsement of practices that could be construed as conspiratorial or as obstructions of justice. The Board’s failure to act decisively could be perceived as complicity in these questionable legal strategies, thereby damaging Outbrain’s reputation and shareholder trust irreparably.

The title of the Board Letter is “unlucky.”

Here are the five risk factors why Outbrain was unlucky when an extreme level of fraudulent bots severely damaged my business.

1. Depth of Experience in Digital Advertising and Analytics

Throughout my career and involving expenditures of over $15 million with Outbrain, I have cultivated extensive knowledge in digital advertising and arbitrage techniques. This depth of experience has equipped me to manage and optimize advertising strategies effectively and endowed me with a keen eye for identifying discrepancies and unethical practices within digital traffic flows. When Outbrain’s fake clicks and bots adversely harmed Nubai, it also introduced a “skin-in-the-game” to investigate the matter for over 14 months. The “skin-in-the-game” factor turned me into a bot fraud researcher and then a bot fraud analyst. I want to understand better what happened to my small business. 

2. Jack Grubman and Lessons on Conflicts of Interest

My foundational experience as a contract paralegal at Paul, Weiss, Rifkind, Wharton & Garrison LLP exposed me to the complexities of high-stakes legal disputes, notably the case involving star Wall Street analyst Jack Grubman. This exposure was particularly enlightening, providing me firsthand insights into the internal mechanisms of conflict of interest and its repercussions in the corporate world. Analyzing Grubman’s communications deepened my understanding of the subtleties of corporate misconduct and the importance of maintaining ethical integrity within professional practices. This experience has been instrumental in framing my approach to handling the challenges posed by Outbrain’s management of its advertising network and its decision-making in legal defenses.

3. McKinsey & Company

After graduating from Morehouse College, I was hired as a contractor at McKinsey & Company. Beyond my core responsibilities, I studied the firm. I would later come to understand how the image of the then “Pope of Corporate America,” Rajat Gupta, was the same person calling his hedge fund friends after a Goldman Sachs board meeting with insider information. The elite pedigree can prevent us from seeing the potential for nefarious corporate or even criminal behavior. My experience at McKinsey and later closely following the firm is relevant to our Outbrain case as things look so polished in the front, but there can be nefarious activity in the back.

4. Alameda, FTX, and Dan Friedberg

In closely following the evolving crypto landscape, the conflict of interest between Alameda, a leading proprietary trading firm, and FTX, a brokerage, was predictive of fraud. There is often increased temptation to commit fraud when there is a promiscuous amount of conflicts. On August 2, 2021, a story I commissioned and directed was published on Moguldom.com: The Most Influential Trader In Crypto, Sam Trabucco, Works With FTX Exchange: Some See Manipulation.

The lawyer for Alameda and FTX (conflict), Dan Friedberg, emailed me directly. There was no reason for me to talk to Dan Friedberg. I didn’t care if regulators, Harvard MBAs, lawyers, and financial institutions couldn’t see issues with this blatant and criminally predictive conflict. I saw enough risk factors to estimate an elevated risk of manipulation and fraud. I didn’t care about Fortune and Forbes magazine covers; I kept my factors scientific and formed my estimates accordingly. I didn’t care if no one in the world saw what I saw; I was strong enough to take a position years before the case made history in the United States.

5. Underestimation as Inefficiency

I am a Black American with roots deeply embedded in the history of Mississippi and Louisiana—lineages that trace back to the era of slave plantations. On the surface, Outbrain’s lack of response and the opportunistic and unethical choice of their current counsel might imply that I was seen as a formidable opponent, not underestimated. Yet, underestimation and accurately assessing risks often coexist subtly. Within the dynamics of risk assessment, there are nuances—places where underestimation hides, even when facing perceived threats.

Outbrain found itself unfortunate, for it collided with perhaps the one American uniquely equipped to unravel and expose the underlying truths. My heritage and experience primed me to detect the discrepancies and connect the dots that others might overlook. It would take someone strong, independent, and confident enough to disagree with everybody.

Outbrain Inc. has become unlucky. 

The KPMG auditors and the Wall Street analysts at JMP Securities, Citi,  or Needham could never figure this out. I hope this is the Jack Grubman moment for American regulators to start tackling the $143 billion global ad fraud industry. 

A potentially helpful framing : “a click-based” Nasdaq without SEC, insider trading, conflict-guard rails.”

This $1 billion dollar click-based Nasdaq generates 70% of its revenue from outside United States legal jurisdiction, with a “trust me” Black Box, and with most of the partners masking their identities and ownership.

Finally, while the recent Board resignation and replacement with the CEO of Double Verify may seem like a quick fix, the Outbrain Board can’t fix promiscuous conflicts with more conflicts. The Jack Grubman case highlights the dangers of mixing investment research with investment banking. The Outbrain Board should self-regulate unique industry-specific conflicts while regulators catch up.

I formally request the Independent Directors on Outbrain’s establishe an intermediary for constructive evidence sharing that is not conflicted with CEO David Kostman, recently resigned co-CEO and founder Yaron Galai, General Counsel Veronica Gonzalez, Head of Legal Affairs Alexia Rosenberg, and Yenisey Rodriguez-McCloskey. I am not only a plaintiff, I am also an unconventional whistleblower.

We have urgent scientific-based evidence that the Board should see now. If the Board allows Rodriguez-McCloskey to stay on this fraud case, it is complicit in facilitating a potential conspiracy, against Nubai.

For observers watching this David vs Goliath fight closely, Nubai Ventures is establishing a legal fund to help take Outbrain to trial for fraud, with substantial punitive damages. 

If you are interested in helping us join this fight, you can email us at data at Moguldom.com. 

You can read more about our potentially historic lawsuit here.

Our first letter to Outbrain’s Board is here:

Jamarlin Martin

Founder and CEO, Nubai Ventures

Freedom, Justice, and Equality