Web Summit in shock with ex-partner, which it accuses of diverting attention with new lawsuit

  • Ana Marcela
  • 12 November 2021

Paddy Cosgrave and former Web Summit partner David Kelly are embroiled in a legal dispute involving venture capital fund Amaranthine.

An attempt to “distract” is how Web Summit (WS) classifies the legal action taken by a former partner, David Kelly, who accuses Paddy Cosgrave of using the tech summit’s resources “for the benefit of his private household”. The summit’s current chief executive is also accused of bullying and intimidation.

The lawsuit comes after Manders Terrace, the owner of WS, filed a lawsuit in the US and Ireland against David Kelly for breaching fiduciary duty, relating to the Amaranthine fund, which resulted in alleged losses of €8.6 million.

“David Kelly is piling claim upon claim and they are being made purely to distract and deflect from the legal case Web Summit has taken against him in Ireland for breach of fiduciary duty, related to the Amaranthine fund,” Web Summit’s official source reacted to ECO.

“We look forward to future hearings when matters of fact will be given due consideration.”

David Kelly’s lawsuit filled in Ireland is another step in a dispute involving the two former partners of Web Summit and that puts on both sides of the barricade David Kelly’s Graiguearidda Ltd, Manders Terrace, a company of which the tech summit is part, and Paddy Cosgrave’s Proto Roto Ltd.

Kelly – who quit the Web Summit in April – accuses Paddy Cosgrave of using the summit’s resources for personal gain, giving for example the sale in 2019 of €850 hand-knit sweaters and a children’s hoodie for €240 created by Cosgrave’s wife, model Faye Dinsmore, on the Web Summit website.

“Mr Cosgrave has run the company in a manner akin to that of a personal fiefdom, as if he owned it outright himself,” David Kelly claimed in the documents filed in court and quoted by the Irish Independent.

David Kelly, a former minority shareholder in WS, also accused Cosgrave of bullying, saying he had been subjected to “harassment, abuse, coercion and intimidation. The relationship between us has now completely broken down and can best be described as irremediably toxic.” Kelly also accuses Cosgrave of having “for many years” a “manipulative” and “threatening” behaviour.

The Amaranthine case

David Kelly’s situation comes after Manders Terrace filed legal action last September against the former minority partner for breach of fiduciary duty, related to the Amaranthine fund, which resulted in alleged losses of $10 million (€8.6 million).

The venture capital fund Amaranthine had been set up in 2018 by Paddy Cosgrave, David Kelly and Patrick Murphy, a former Goldman Sachs manager, to invest in startups, with Web Summit coming forward with €2 million and, with that, entitled to 30% of the profits.

Problems arose when the possibility of creating a second fund arose, and the partners were unable to reach an agreement. In April, Kelly left the company and reportedly, in private messages sent to Cosgrave, indicated that he was planning to start a business or work for someone else. Subsequently, he created, with Patrick Murphy, the Semble fund, which no longer included WS or Paddy Cosgrave in the management and capital.

According to court papers filled in San Francisco, and reported by the Irish Times, the owner of Web Summit accuses the two managers of having created a plan “to deceive Web Summit and Mr Cosgrave, breach an agreement with them, and secretly establish a follow-on fund that improperly usurped Web Summit’s brand, resources and assets.”