Exclusive: a Cerebral Investor Just Sued the Mental-Health Startup – Business Insider

Access Industries, the investment firm founded by billionaire Len Blavatnik that invested in mental health company Cerebral, is suing the company and another of its backers as tensions mount inside the mental health company, according to documents obtained by Business Insider.
It’s the latest challenge to the once-hot mental health startup, which launched in 2020 to provide mental healthcare online. A Business Insider investigation published in June 2022 found that Cerebral flouted clinical guidelines in prescribing serious medications and sometimes put patients’ health at risk. The startup is now the subject of an ongoing investigation by the US Department of Justice into its prescribing practices as it burns through cash.
The lawsuit, filed by Access Industries on April 2 in Delaware, alleges an undercover power grab by WestCap, another Cerebral investor.
The suit claims WestCap has been exerting “soft control” over the company through a series of secret consulting agreements since 2022, which allowed WestCap to advise Cerebral leaders on critical management decisions without its board of directors’ knowledge or authorization.
The lawsuit also claims that “in the wake of the DOJ investigation, Cerebral’s financial position has become dire.”
Now, WestCap is aiming to take control of more board seats, the lawsuit says. A new agreement posed in March would allow Cerebral’s investors to cash out their Series C preferred stock in exchange for common stock. That agreement would force those investors to relinquish certain claims, including their board seats, according to the lawsuit.
“In sum, the Series C Self-Tender is the culmination of what can only fairly be described as a return to the Wild West of corporate misgovernance,” the lawsuit claims.
A WestCap spokesperson said in a statement to BI that the complaint is Access Industries’ attempt to interfere with “a legitimate stock redemption” approved by an independent committee of Cerebral’s board, which Access Industries’ representative on Cerebral’s board authorized. The spokesperson said the Series C Self-Tender agreement is clearly beneficial to employees and shareholders.
“Our involvement in the company’s operations was eagerly welcomed by management and routinely disclosed and presented to the board including the plaintiff directly and is entirely consistent with our operating equity model,” said the WestCap spokesperson.
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In a statement to BI, Cerebral also refuted the claims in the lawsuit.
“We maintain that this investor’s allegations are without merit, and we will vigorously defend the Board’s special committee against these claims,” said a Cerebral spokesperson. “The company is financially stable, and we remain focused on our mission of delivering high-quality mental healthcare to people in need.”
Once the hottest and fastest-growing mental health startup, Cerebral’s fall from grace has been stunning. The company, which last raised a $300 million Series C in December 2021 at a $4.8 billion valuation, has tumbled under intense media scrutiny and multiple federal investigations.
Cerebral launched in 2020 to provide mental healthcare online for conditions like anxiety, depression, and ADHD.
Stories by outlets such as The Wall Street Journal, Bloomberg, and Business Insider prompted the US Drug Enforcement Administration and DOJ to launch investigations into Cerebral’s prescribing practices.
Since then, Cerebral hasn’t raised any more venture funding, and the mental health company has conducted at least three rounds of layoffs.
It’s losing money to state probes, too. In December, an investigation by the Office of the New York State Attorney General found that Cerebral had instituted a “long and burdensome” process for canceling its services, charging patients in some cases after they tried to cancel. The office required Cerebral to pay $740,000 in penalties and restitution.
As alleged in the April lawsuit, WestCap’s consulting agreements with Cerebral could be an attempt by the firm to protect its investment in the company as Cerebral sinks. The suit claims Access Industries only learned of these agreements in February.
WestCap currently occupies one of six seats on Cerebral’s board of directors, per the suit. Access Industries, the plaintiff in the lawsuit, occupies another seat, as does SoftBank. CEO David Mou and two independent directors hold the remaining three seats.
The Series C buyout agreement levied last month, which could grant WestCap more seats on the board, according to the complaint, originally set a March 29 deadline for shareholders to participate, but that deadline has been extended.
The suit says that SoftBank has “long sought to cash out of its position in the company,” and intends to do so through this Series C buyout agreement.

SoftBank declined to comment.
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