Were you unable to attend Transform 2022? Check out all of the summit sessions in our on-demand library now! Watch here.

After raising a nearly $500 million round from high-profile investors in May, Chicago ad startup Outcome Health and its two founders are now being sued by investors who allege that the company presented them with “fraudulent and false information.”

Founded in 2006 by CEO Rishi Shah and Shradha Agarwal, Outcome Health — valued at $5.5 billion after its latest round — installs tablets and other electronic devices in doctors’ offices and waiting rooms. The company then charges medical device companies, pharmaceutical companies, and other life science businesses to display advertising on those devices. An October investigation by the Wall Street Journal said that some Outcome Health employees had previously overcharged clients, billing them for advertising on more screens than their ads were actually displayed on.

The investors — which include the Goldman Sachs Group, Chicago-based Pritzker Group Venture Capital, and Capital G (Alphabet’s investment arm) — allege in a lawsuit filed in the New York State Supreme Court in New York County that the company, including Shah and Agarwal, knowingly provided false data and financial reports to convince the firms to participate in the $487.5 million round.

The investors “discovered manipulations consistent with those reported by The Wall Street Journal,” according to the lawsuit filing, which alleges that Shah and Agarwal “either knew of, or recklessly disregarded” the falsified data.

The lawsuit brings one count each of fraud, breach of contract, negligent misrepresentation, aiding and abetting, and rescission against the defendants.

Outcome Health’s attorney, Sanford Michelman, said in a written statement provided to VentureBeat that the claims have “no merit.”

Additionally, the lawsuit alleges that after the Journal published its story in October, Shah took steps to move $225 million out of a subsidiary of Outcome Holdings. The $225 million — part of the $487.5 million investment — was allegedly set aside for Shah and Agarwal. According to the Journal‘s Rolfe Winkler, “investors asked that the court freeze the funds to pay for any future judgments.”

In a written statement provided to VentureBeat, Shah and Agarwal forcefully denied the allegations that they tried to move the funds, writing that ‘”we had the right to take out this money, and we did not. Instead, we decided to make the funds available for the company’s continued growth towards its mission.” Shah and Agarwal also accused Goldman Sachs of trying to intimidate the company with “strong-arm Wall Street tactics” and said that “the investors’ money grab simply is inexcusable and disappointing.”

VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative enterprise technology and transact. Learn more about membership.