Dapper Labs CEO accused of extravagant spending, humiliating employees, focusing on networking with celebrities rather than product development
The Block interviewed 11 current and former employees of Dapper Labs, revealing CEO Roham Gharegozlou's penchant for private jets, luxury homes, and extravagant spending habits. The CEO's erratic behavior and public humiliation of employees during the bear market has led to internal turmoil and high executive turnover rates.
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Private Yacht Party
According to a May post on Instagram by Grammy Award-winning DJ Diplo, he had to communicate continuously with the staff at the entrance to gain access to a private yacht party during the Cannes Film Festival last year. He mentioned feeling lucky as the host of the party happened to pass by and let him in.
This party was hosted by Dapper Labs co-founder and CEO, Roham Gharegozlou.
The weekly rental cost of the luxury yacht exceeded $200,000, which might not sit well with some of the employees laid off by Dapper Labs during the bear market. Dapper Labs laid off 22% of its staff in November last year, and another 20% at the end of February.
In a letter to investors, Gharegozlou stated that the layoffs were a difficult decision as part of the company's restructuring, but the company is in good financial standing with no outstanding debts.
CryptoSlam data shows that NBA Top Shot trading volume reached a peak of $224 million in February 2021, but dropped to just $2.8 million in February this year.
Valuation of $7.6 Billion
Dapper Labs, the developer behind the once popular NFT project CryptoKitties in 2017, raised $15 million thereafter, including from notable investors like a16Z.
NBA Top Shot also saw a rise during the bull market in 2021, with sales exceeding $200 million for two consecutive months. Following this, Dapper Labs secured $305 million in funding in March, on top of $250 million in September, valuing NBA Top Shot at around $7.6 billion after about three years.
As Gharegozlou's fame soared with the valuation, departing employees pointed out that around this time, Gharegozlou's behavior began to change.
Celebrity Marketing Strategy
Insiders claim that after the success of NBA Top Shot, Gharegozlou started receiving calls from various corporate celebrities and top executives, almost anyone he wanted to meet.
There was a significant change in lifestyle as Gharegozlou began frequenting private jets, one of the most expensive expenses, with a single trip costing between $60,000 and $100,000.
Gharegozlou's accommodation expenses during his trips abroad were also astonishing, such as spending $300,000 to rent an $85 million mansion in Beverly Hills for a period, or staying in a five-star hotel suite for $30,000 per night.
Insiders mentioned that Gharegozlou believed that pleasing celebrities was a necessary marketing strategy, and these expenses were naturally categorized as marketing budgets.
Four departing employees stated that even during the bear market, Gharegozlou preferred to hype up partnerships with celebrities rather than developing new products or recruiting developers for the Dapper blockchain Flow. While this helped in releasing flashy press releases, it usually did not bring tangible value.
Three insiders mentioned that Dapper even sponsored New York Fashion Week in February last year. According to Vogue, participating celebrities included Justin Bieber, Canadian rapper Drake, Leonardo, and more.
Lack of Board Oversight, CEO's Drastic Change in Behavior
With 5 board members including Gharegozlou himself, his brother, and a close university friend, they turned a blind eye to the CEO's high consumption expenses.
When the bear market hit, Gharegozlou became inconsistent in character, and the internal culture of the company became toxic and out of control, with employee resignations and layoffs becoming more frequent.
Five insiders pointed out that it was common for newly hired executives to only last a few months, either resigning because it was too painful to work under Gharegozlou or being fired. Every employee interviewed by The Block noted that the high turnover rate led to a high-pressure work environment, with everyone afraid of conflicting with Gharegozlou.
Many anonymous employees also mentioned that Gharegozlou would publicly humiliate employees on Slack and yell at them during video calls, creating a culture that made employees more anxious and inclined to leave.
Crisis Emerges: Sharp Decline in Business, Layoffs, Media Exposés, Securities Law Violations
Previously reported, a U.S. federal judge applied the Howey Test and deemed NBA Top Shot's "NBA Top Shot Moments" as securities, potentially leading to a collective lawsuit against Dapper Labs.
In response to The Block's exposé, Dapper Labs stated:
We value each employee's contribution to our business and community and take their feedback seriously. Claims of excessive spending are inaccurate and misleading; our business is inherently based on entertainment and sports, and we will continue to invest in high-impact activities.