Dinahs Doodles
A former East West Bank executive won a key battle in a legal battle with the Pasadena, Calif. Company which alleged he used his trade secrets to create a digital banking product for a startup it he had founded.
Last week, a federal judge dissolved a preliminary injunction East West previously obtained against Sukeert Shanker, the bank’s former director of operations for digital banking.
The ruling frees Shanker from a court order he says stifled his ability to raise funds for Aeldra Financial, a mobile banking startup he founded in 2019.
“This is a business betting case,” said Yar Chaikovsky, lawyer at Paul Hastings who represents Shanker. “Who’s going to fund a business that’s got a lawsuit against it, let alone an injunction saying you can’t do X, Y, or Z?” “
An East West spokesperson declined to comment, citing the ongoing litigation.
The case offers a window into the fierce disputes over alleged trade secrets unfolding as banks and fintechs race to develop digital products and services.
Banks have come on both sides of these fights. Last year a Denver company continued PNC Financial Services Group, accusing that a product called PNC Paid was built on stolen trade secrets. PNC called the case a baseless effort to eliminate competition.
Shanker, who joined East West in 2017, helped the $ 61 billion asset bank develop Velo, a digital banking service that helps so-called non-resident aliens open bank accounts in the United States. He left East West in 2019 amid a dispute over a bonus he believed was owed to him.
In October 2020, East West filed a complaint against Shanker, alleging in its complaint that he had stolen a “treasure trove of proprietary information” that would allow him to create a competing product.
Shanker, who was part of the team that built Marcus by Goldman Sachs before joining East West, maintains that the documents he took did not contain trade secrets.
Velo by East West Bank is a U.S. bank account for people living outside of the United States, according to the bank’s marketing materials. Customers can apply from a mobile app. East West currently accepts government issued ID cards from China, Hong Kong, Taiwan, and India.
Aeldra also offers a mobile bank account in the United States for foreign nationals – the startup is in partnership with Blue Ridge Bank in Virginia – and is currently focusing on the Indian market.
Over the summer, U.S. District Judge William Orrick granted East West’s motion for a preliminary injunction against Shanker. But Orrick subsequently reversed course following the appearance of new documents.
First, it emerged that East West had filed for patent applications, which contained information about the bank’s process for integrating non-resident aliens, and which had been publicly available as of April 2021.
An arbitration agreement was also discovered, which led the judge to conclude that the Federal Court is not the appropriate place to decide the dispute.
In an Oct. 20 order, Orrick wrote that if East West had disclosed the arbitration agreement and patent applications, “I would not have issued the preliminary injunction in its present form, if at all.”
Shanker’s attorneys have said they expect East West to take the dispute to arbitration, where it will be held on a confidential basis.
In an interview, Shanker described the lawsuit as an effort to hamper competition. “I felt like the eastern West Bank was doing this to hurt Aeldra,†he said.
He said the litigation has placed a financial burden on his startup, in addition to hampering its ability to raise funds. He added that the dissolution of the preliminary injunction will allow Aeldra to raise funds for a Series A round.
“It’s good to have this behind us. I always knew there was no substance behind it, but you have to go through the process, â€he said.
