Carta has told employees it is exiting its emerging stock trading business and suspending all sales activities “until further notice.”

Carta CEO Henry Ward. Provided by Karuta (2)

Carta, which controls the cap tables of about 40,000 private startups, has announced these changes after the company has already suspended its own stock sales activities following an explosive conflict of interest scandal. It will no longer serve as a broker who coordinates corporate stock sale transactions. Core business.

“To address concerns that we are not acting in the best interests of our founders, we are exiting the distribution trading business,” Carta CEO Henry Ward said in a blog post on Monday. ” announced.

The move follows allegations of self-dealing that surfaced on social media this weekend from one of Carta’s customers. The CEO of customer Linear accused Carta of using the startup’s confidential data without his approval to build Carta’s own order book for its secondary market platform.

Carta blamed the incident on a rogue employee. However, shortly after the allegations surfaced this weekend, Carta temporarily suspended all sales activities. luck Have learned.

Jeff Perry, Carta’s chief revenue officer, posted a notice on one of its internal Slack channels Sunday afternoon instructing employees that Carta was “pausing sales activity until further notice.”

“We do not expect it to be suspended for more than a few days,” Perry said in a message. “We will monitor and provide guidance on a daily basis.”

Perry continued in his message that the most important thing right now is that Carta values ​​its customers and “reminding them why they trust Carta.” He emphasized in all caps and instructed his employees not to answer questions about the matter, which he then directed to himself and one of Carta’s vice presidents. Perry told employees on Sunday that he would update everyone when Carta (which Axios said was valued at $8.5 billion after the final tender offer) is able to “resume business as usual.”

Carta CEO Henry Ward initially responded to the allegations on Twitter, then published a blog post on Medium on Sunday explaining Carta’s data privacy policy. In the post, Ward said Carta’s outreach to the shareholders of the three companies was “a complete violation of our privacy protocols.” And we dealt with this issue over the weekend. Ward said Carta is continuing to investigate the incident “to ensure it never happens again,” and added that Carta is reconsidering whether it should be in the liquidity business at all.

Ward appeared to come to a conclusion on Monday, announcing that the company would no longer be involved in the “liquidity” business. Compared to the $250 million in annual revenue generated by its cap table business (including $100 million in fund management and $20 million in private equity), this business accounts for only a small portion of Carta’s annual revenue, Ward said. It’s only $3 million. The knowledge that Carta was using sensitive data to power its secondary market business was not worth risking its primary business.

“There’s no advantage to having true data if we can’t use it. And it’s a disadvantage for people to think we’re using it. If we send an email to , how will our customers know whether the information is publicly or internally obtained? Once we tell them; Will they believe me? And does it matter? Just the appearance of inappropriateness is terrible,” Ward wrote on Monday.

“We will continue to focus on what we do best: cap tables and money management software. We have many talented people working on private market liquidity issues. I will be rooting for them enthusiastically from the sidelines,” Ward wrote.

A Carta spokesperson did not immediately respond to a request for comment.

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