Hyperloop project faces explosive lawsuit from co-founder

One of technology's most hyped science projects is facing Hollywood-style drama.

Hyperloop One, the ultra high-speed transportation system conceived by Elon Musk, is being sued by a co-founder and former employees, who claim the company's top leaders have misused funds, breached their fiduciary duties and conspired "to augment their personal brands, enhance their romantic lives, and line their pockets (and those of family members)."

The big name players in the suit are all defendants. Shervin Pishevar, a Hyperloop co-founder, was an early investor in Uber and hosted President Barack Obama at his San Francisco home last year. Joe Lonsdale is a co-founder of Palantir Technologies and a well-known venture capitalist. And Robert Lloyd is Hyperloop's CEO and was previously on the short list to succeed John Chambers as CEO of Cisco.

The lead plaintiff is Brogran BamBrogan, who co-founded Hyperloop Technologies (now Hyperloop One) along with Pishevar in 2014, and was forced to resign last month for reasons that to date hadn't been made clear. BamBrogan was joined in the suit by three other early executives.

Hyperloop, based in downtown Los Angeles, claims to be building the "5th mode of transportation," with hardware like levitation rigs, wind tunnels and electromagnetic test stands, according to its website. It's the type of project that attracts Silicon Valley dreamers with promises to, quite literally, invent the future. Pishevar told CNBC earlier this year that the company has raised close to $100 million.

But according to BamBrogan, the technology promise "is being strangled by the mismanagement and greed of the venture capitalists who control the company."

Among BamBrogan's most explosive claims are that Pishevar started dating the company's outside public relations representative and increased her pay to $40,000 a month, from $15,000 a month, more than any employee. Also, Lonsdale allegedly insisted on hiring his brother's two-person firm to be Hyperloop's exclusive investment bank, despite having "no notable experience with companies building hardware and engaged in infrastructure development, and few independent contracts with international and top-tier funds."

Hyperloop co-founder files suit against Pishevar
Hyperloop co-founder files suit against Pishevar

The complaint says that plaintiffs sent a letter, signed by 11 top employees, to Shervin Pishevar, Lonsdale and Lloyd on May 26, about the issues they've witnessed and the need for changes. The response was one of "divide-and-conquer," with defendants making clear that "no significant changes would be made."

The topic of internal strife was raised at a dinner between Shervin Pishevar and some Russian investors in Moscow on June 14, an event that BamBrogan was supposed to attend but didn't so he could stay home and work on "critical issues facing the company," the complaint says.

Hours after the dinner, according to the suit, Shervin's brother Afshin placed a noose on BamBrogan's chair. It was caught on Hyperloop's security cameras.

Hyperloop's attorney Orin Synder, a partner at Gibson Dunn, called the lawsuit "unfortunate and delusional" and said it will be "met with a swift and potent legal response." As for the company's progress, Snyder said in an e-mail that "Hyperloop is on track, its board and team are united and today's bogus lawsuit will have no impact on its goal of becoming the first company to bring the Hyperloop to the world."

Some of the 11 employees who signed the letter remain with the company. BamBrogan was forced to resign, while David Pendergast, one of the plaintiffs and the company's assistant general counsel, was fired in the office by Lloyd in front of his wife and children, according to the complaint.

Defendants then began a "blatant smear campaign," which included an e-mail from Lonsdale to the board describing BamBrogan as "unstable" and "gone haywire."

The suit was filed on Tuesday in the Superior Court of California, Los Angeles County.

Read the whole lawsuit below.