DOJ Opens Criminal Probe into Allegations Deel Recruited a Spy at Rival Rippling

The U.S. Department of Justice has launched a criminal investigation and issued grand-jury subpoenas into allegations that the HR platform Deel recruited a spy inside its competitor, Rippling. The probe centers on claims that Deel, valued at approximately $17 billion, engaged in corporate espionage to gain an advantage in the competitive global payroll and HR tech market.

The U.S. Department of Justice has opened a criminal investigation into allegations that Deel, a fast-growing HR and payroll platform, recruited a spy within its rival company, Rippling. According to sources familiar with the matter, federal prosecutors have sent out grand-jury subpoenas in recent weeks as part of the probe.

The investigation focuses on claims that Deel, which was last valued at around $17 billion, engaged in corporate espionage by recruiting an employee from Rippling to access confidential information. The subpoenas seek information related to these allegations, signaling a serious escalation in the legal scrutiny of the competitive practices within the HR tech sector.

The Competitive Landscape

Deel and Rippling operate in the highly competitive market of global payroll, HR, and employee management software. Both companies have experienced rapid growth, particularly as remote work expanded the need for tools to manage international teams. Deel has positioned itself as a solution for hiring and paying employees in over 150 countries, while Rippling offers an integrated platform for HR, IT, and finance operations.

The allegations suggest a potential breach of trade secret laws and unfair competition practices. Corporate espionage cases, particularly those involving technology and data, can lead to severe legal consequences, including criminal charges under the Economic Espionage Act and civil lawsuits for misappropriation of trade secrets.

What's Being Alleged

While the specific details of the alleged spying are not publicly detailed in the subpoena information, such investigations typically involve claims that an employee was recruited to share proprietary information, such as product roadmaps, customer lists, pricing strategies, or internal financial data. The involvement of a grand jury indicates the DOJ is considering potential criminal indictments, which could target individuals or the company itself.

For Deel, a company that has raised hundreds of millions in venture capital and is reportedly preparing for an IPO, a criminal probe represents a significant risk. It could impact investor confidence, lead to executive scrutiny, and potentially result in fines or restrictions on business practices. For Rippling, the investigation validates its concerns about competitive integrity, though it may also raise questions about its internal security measures.

Industry Implications

This case highlights the intense competition and high stakes in the HR tech industry, where rapid growth and large valuations are common. As companies scale globally, protecting intellectual property and sensitive business information becomes increasingly critical. The outcome of the DOJ's investigation could set a precedent for how corporate espionage is handled in the tech sector, particularly for companies operating across borders.

Regulatory scrutiny in this area has been increasing. The DOJ and the Federal Trade Commission have both signaled a focus on anticompetitive practices and trade secret theft, especially in technology-driven industries. This probe aligns with broader efforts to enforce fair competition and protect innovation.

Broader Context

The investigation comes amid a wave of legal and regulatory actions in the tech industry. From antitrust lawsuits to data privacy enforcement, companies are facing heightened oversight. For HR tech firms, which handle sensitive employee data and financial information, compliance and ethical conduct are paramount.

Deel has not publicly commented on the investigation. Rippling has also not issued a statement. The DOJ typically does not confirm or deny ongoing investigations. The case may take months or years to resolve, depending on the complexity of the evidence and the cooperation of involved parties.

What to Watch

Key developments to monitor include:

Any formal charges filed by the DOJ
Deel's response to the allegations and its internal governance
Rippling's potential civil litigation against Deel
The impact on Deel's upcoming IPO plans, if any
Regulatory reactions from other jurisdictions, as both companies operate globally

For now, the tech industry will be watching closely as this case unfolds, as it touches on core issues of competition, ethics, and legal compliance in a rapidly evolving sector.

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Featured image: The U.S. Department of Justice building in Washington, D.C. (Image: WSJ)