Judge denies Outcome Health investors' request to freeze $225M account for company founders

A New York state judge denied a request to freeze $225 million as part of a lawsuit a group of investors filed against Outcome Health and its two founders Nov. 7, according to the Chicago Tribune.

The lawsuit, filed in New York State Supreme Court in New York County, alleged the Chicago-based tech and advertising startup engaged in fraud and breach of contract. The lawsuit follows an Oct. 13 The Wall Street Journal investigation that alleged a subset of employees at Outcome Health manipulated pricing and sales information to mislead pharmaceutical advertisers.

In the lawsuit, investors claimed Outcome Health provided investors with false data and financial reports prior to their combined $487.5 million investment into the company. The investors — including Goldman Sachs Group's asset management arm and Alphabet's CapitalG unit — said they were entitled to reclaim their respective investments, and that $225 million placed in a separate account for the founders should be frozen.

The state judge denied the investors' request to freeze $225 million slated to be held by a subsidiary of Outcome Holdings, according to the Chicago Tribune.

In a court document filed by Outcome Health last week, company co-founders Rishi Shah and Shradha Agarwal said they considered using a portion of the funds to pay company debt and "otherwise stabilize the business."

"Rishi and Shradha remain hopeful they will be able to use the funds for investing back into the business they built, which continues to meet the important needs of patients and doctors alike," Michael Carlinsky, an attorney on behalf of Mr. Shah and Ms. Agarwal, said in an emailed statement to Becker's Hospital Review. 

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