Online retailer throws founder Justin Cameron under a bus in court.

Earlier today, online retailer SurfStitch sold Surf Hardware International (owners of FCS) for seventeen-million dollars. A lot of money, you’d say, except SurfStitch threw twenty-three million dollars at it one year go.

Not the dumbest biz decision in surf, of course. That award goes to Quicksilver and the $320 million they shovelled into ski biz Rossignol a decade ago. And sold three years later for $147 mill.

Of course, if you’re running the game at SurfStitch, a company that was valued at half-a-billion dollars one year ago and is sitting at fifty now, and you’re being sued by one of your shareholders who is simultaneously trying to buy you, and you’re convinced the founder of your company has brought it all on you, well, a six-million-dollar hit is nothing.

As revealed by The Australian, SurfStitch went into court today and threw its founder Justin Cameron straight under a bus.

Let’s examine.

The accusations form SurfStitch’s (SRF) defence to an increasingly bitter legal battle with now suitor Coastalwatch in relation to disputed licensing deals.

Coastalcoms is a company tied to surf website Coastalwatch, which launched a failed bid for SurfStitch in November, and Crown Financial, which owns 10 per cent of SurfStitch.

While the action in 2016 had been remarkable, today’s defence launched in the District Court of Queensland puts it all in the shade, with Mr Cameron accused of abusing of his duties.

“Mr Cameron caused the company to enter into a contractual scheme with Coastalcoms and TCI, allegedly for the purpose of inflating the revenue and profit of SurfStitch for the first half of the 2016 financial year in a manner that contravened the provisions of the Corporations Act 2001,” said a SurfStitch statement to the Australian Securities Exchange.

The purported contraventions of the Corporations Act were made without the board understanding the true nature of the actions by Mr Cameron, according to SurfStitch.

“It is also alleged that, as a consequence of the alleged contractual scheme, an amount of $20.3m was included as revenue in the company’s half year financial report for FY16,” the company added.

Coastalcoms directors Kim Sundell and David Wooldridge have also been drawn into the SurfStitch defence, with allegations they both “knowingly assisted” Mr Cameron with his alleged breaches of statutory and fiduciary duties.

SurfStitch noted its allegations had yet to be proven or considered by the court.

Would these revelations suggest to you that the company might not be the safest place to park your money? And that, if you had any residual cash left in the biz, that it might be prudent to get the hell out?

If you answered yes, you are wrong! Soon after the allegations, shares shot up by almost ten per cent!