Think the saga of the over-funded, under-delivering startup called Color is over? Think again.

Former employee Adam Witherspoon is suing the company and Bill Nguyen for “intentional infliction of emotional distress” and harboring an intimidating work environment.

Incidentally, the lawsuit confirms last month’s juicy rumor: That Apple has acquired Color’s engineering team.

Much of the suit, filed by San Francisco law firm Dhillon & Smith, focuses on Color founder and chief executive Nguyen himself, who it accuses of embezzlement, abuse, and even armed intimidation of his employees.

Nguyen did not respond to our request for comment.

Color was a controversial startup that raised $40 million in investment capital in March, 2011, largely on the strength of its founding team, led by serial entrepreneur Nguyen. That seemed like a lot of money for a photo-sharing startup that sounded a lot like Instagram, but it was definitely too much given what the team actually accomplished. More than a year later, Color had a paltry 440,000 monthly active users, and the board voted to wind down the company in October, 2012, as VentureBeat first reported. Later, rumors emerged that Apple was acquiring the company’s engineering team for $2-5 million, while winding down Color’s now-worthless patent portfolio and other company assets.

Many of the accusations are pretty damning, but what’s most startling are the claims that the Color board of directors initially turned a blind eye to Nguyen’s behavior, even when employees submitted evidence of the abuse.

According the claim, the board didn’t get involved until July, when it announced that Nguyen was stepping down. It was this point that board members opened up an investigation against the Color CEO.

The suit also confirms that Color’s assets have indeed been sold to Apple, which has remained a rumor until now. But while Apple is acquiring Color’s engineering team and intellectual property, Witherspoon says he was the only technical employee left out of the deal. This, he says, is the company’s retaliation for cooperating with an investigation into Nguyen’s misconduct.

Says the claim:

When Plaintiff Witherspoon inquired about his potential future in a phone call, Defendant Nguyen falsely stated, “I think you would be crucial to what we are trying to do at Apple.” Defendant Nguyen ensured Plaintiff Witherspoon he would be part of the transition team to Apple. Since every other member of the engineering team was going to be hired by Apple, there was no apparent reason why Plaintiff Witherspoon would be excluded.

In all, many of the claims mesh with the bizarre string of events that have come out of Color in the past few months. But is the craziness of the lawsuit all in the plaintiff’s mind? Or is this lawsuit a real reflection of craziness in the company?

Clearly, there’s a lot in this story left to tell.

We’ve contacted Color for comment, and will update this story when the company responds.

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