Compliance Considerations From Reported DOJ Corporate Espionage Probe

00:00

24:53

Quick Hits

• The DOJ has reportedly launched a potential criminal investigation into a human resources software start-up for alleged corporate espionage against a rival company.
• The potential probe comes amid back-and-forth lawsuits between the two companies, including claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) and Defend Trade Secrets Act (DTSA).
• The situation highlights the need for robust corporate governance and compliance programs.

According to a Wall Street Journal report, the DOJ has opened a criminal investigation into Deel, a human resources and payroll software company valued at approximately $17 billion, over allegations that it orchestrated a corporate espionage operation against rival firm Rippling. The report indicates that U.S. Attorney Craig H. Missakian for the Northern District of California has issued grand jury subpoenas seeking documents and information related to an alleged spying operation.

Deel has said that it was not aware of any criminal investigation and would cooperate with authorities. The company has denied such allegations.

The potential criminal probe comes after back-and-forth lawsuits between the rival companies, with allegations of corporate espionage that have rocked the technology and start-up world. But the DOJ’s alleged involvement potentially raises the stakes, underscoring the legal boundaries in competitive intelligence between companies and the importance of trade secret protection.

Competing Civil Allegations

In March 2025, Rippling filed a civil lawsuit against Deel in the U.S. District Court for the Northern District of California, alleging Deel “cultivated a spy to systematically steal its competitor’s most sensitive business information and trade secrets,” including “sales leads, sales pipeline, and its entire playbook for pitching prospective clients.”

An amended complaint filed in June 2025 named several of Deel’s executives and alleged that Deel directed a “racketeering enterprise” that victimized at least four companies, claiming violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and the Defend Trade Secrets Act (DTSA), among other counts. Specifically, Rippling claims Deel conspired with other defendants in a corporate espionage scheme that included Deel hiring Rippling employees—who allegedly took and gave confidential company information to their new employer—and paid cryptocurrency to an existing Rippling employee in exchange for his misuse of numerous software services to steal trade secrets. Last month, the U.S. District Court for the Northern District of California found that some state law claims against Deel were preempted but largely denied motions to dismiss the remainder of the suit.

Deel has denied Rippling’s allegations, calling them a “smear campaign,” and has fired back with a countersuit in Delaware state court. That suit alleges that Rippling has “engaged in a corporate espionage scheme against Deel for the purpose of stealing Deel’s proprietary product information to build Rippling’s own competing products” and “copycat” its products.

Trade Secret Protection Under Federal Law

The DTSA, enacted in 2016, amended the Economic Espionage Act (EEA) to create a private civil right of action for trade secret misappropriation. Critically, the DTSA also amended federal law to treat a violation of the EEA as a predicate offense under RICO. That means trade secret theft can trigger RICO’s enhanced remedies, including mandatory treble damages and attorneys’ fees in civil actions (plus up to twenty years imprisonment in criminal cases).

Compliance Considerations for Corporate Counsel

• Competitive Intelligence Programs—This dispute highlights a critical distinction between lawful competitive research and unlawful corporate espionage. The alleged conduct—if true—potentially crossed legal boundaries by involving the theft of confidential information through an insider, misappropriation of trade secrets, and potential wire fraud through electronic communications used to facilitate the scheme.
• Insider Threat Detection and Access Controls—A notable aspect of the case is the allegation that the scheme was allegedly detected in part by an internal security measure, with the use of a “honeypot” trap in which the security team set up a dummy communication platform that the spy allegedly accessed and searched. This highlights the importance of system monitoring and strict access controls for sensitive information.
• Corporate Governance—The allegations in this case extend to company executives said to have personally directed the alleged espionage operation. If substantiated, this would represent a failure of corporate governance. Moreover, the DOJ’s involvement could signal potential criminal corporate misconduct.

Key Takeaways

The DOJ’s reported criminal inquiry represents an instance of infrequently publicized governmental involvement in corporate espionage enforcement. While the allegations remain unproven and Deel maintains its innocence, the case serves as a stark reminder that aggressive competitive tactics can cross legal boundaries—some of which can have severe consequences. The intersection of trade secret law, RICO, and potential criminal prosecution creates a powerful enforcement framework that can result in treble damages, criminal penalties, and reputational harm.

In light of this case, companies may want to consider:

• implementing enhanced security measures to protect trade secrets, including comprehensive trade secret identification and protection programs, access controls, encryption, and employee training on handling confidential information;
• reviewing compliance programs to ensure that competitive intelligence activities remain firmly within legal bounds; and
• reviewing corporate governance mechanisms and executive training to ensure accountability and compliance.

Ogletree Deakins’ Whistleblower and Compliance Practice Group and Unfair Competition and Trade Secrets Practice Group will continue to monitor developments and will provide updates on the Ethics / Whistleblower, Unfair Competition and Trade Secrets, and Workplace Investigations and Organizational Assessments blogs as additional information becomes available.

A version of this article was previously published by the American Bar Association Litigation Section: Corporate Counsel.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts