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3 Cases Proving the Value of Ongoing Due Diligence

After an investment, leadership appointment, business transaction or acquisition is concluded, the challenges of due diligence, monitoring risks and maintaining a competitive advantage have only just begun. From social media activity that can compromise reputation and trust to signs of personal financial distress, as well as civil and criminal litigation, the information you aren’t aware of could hurt you.

Following an investment or initial background check, firms and entities still need to:

  • Stay informed on management teams’ activity online or in court systems.
  • Minimize reputational and business risk.
  • Safeguard investments and meet internal compliance requirements.
  • Outsource valuable time and resources spent combing through false positives and noise.

There is no shortage of examples of what happens when an organization isn’t aware of or doesn’t act on known risks discovered via continuous background checks. In fact, one of the first questions we get asked here at Gryphon is, “What is the craziest thing you have ever found?” Below are examples from the Gryphon archives and recent headlines that prove the value of ongoing monitoring and the resulting repercussions of it not being put to practice:

Found: Assault and Battery Charge
Through a routine semi-annual refresher check on an executive at a portfolio company of a private equity firm, Gryphon discovered the filing of a state-level civil lawsuit. The executive was named as a defendant in a motor vehicle related personal injury lawsuit stemming from an incident in which the executive drove his vehicle through a construction zone, striking working personnel. The civil complaint sought damages related to negligence, assault, and battery.

Found: Employment Lawsuit
In a post-hire monitoring check, Gryphon discovered a lawsuit filed by a newly appointed executive against their former employer alleging breach of contract and wrongful termination that was ongoing and had potential reputational and risk liabilities.

Found: Toxic Culture, Toxic Financials
Founded by the pro-regulation, laidback entrepreneur Sam Bankman-Fried in 2019, FTX grew to a $32 billion capital valuation before crashing publicly in 2023 and filing for bankruptcy one day after Bankman-Fried assured investors that everything was all right. However, early tweets by the company’s executives and employees revealed signs of distress. The CEO of FTX’s trading house, Alameda Research, and Bankman-Fried both bragged about regular drug use; the former on Twitter and the latter in a podcast. In addition, the Institute of Internal Auditors summed up the financial culture this way,

Neither FTX nor Alameda Research had an audit committee, board meetings, or an internal audit function. Employee ranks were rife with conflicts of interest. Alameda reportedly granted massive personal loans to Bankman-Fried and others. A custom-software ‘backdoor’ was used to conceal the misuse of customer funds. Related-party transactions raised countless red flags. Expenses were approved via personalized emojis in online chats. Many communications were set to auto-delete.

In all of these examples, a proactive and ongoing plan to monitor public records and adverse media was crucial to minimizing the loss of time, money and credibility. The risk profile of a company or individual can change in the time it takes to like a Twitter post, so it is necessary to monitor and manage continuously.

Following an investment or initial background check, firms turn to Gryphon to conduct ongoing due diligence on their partners and recent acquisitions. Contact us at [email protected] to learn more.


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