Two of Juul Labs’ longtime directors — a Hyatt Hotels heir and a venture capitalist — helped bail out the e-cigarette maker when it was on the brink of insolvency, the Wall Street Journal reported. It was a deal that preserved the equity investments of Nick Pritzker and Riaz Valani, cemented their influence over the company and secured them releases from liability in thousands of lawsuits against Juul. Now Juul is fighting a lawsuit from a group of investors alleging that those two directors were looking out for their own interests, not the company’s. Among the questions in dispute is whether the bailout that allowed Juul to avert bankruptcy in 2022 benefited insiders at the expense of other investors. The allegations have come to light as the company is trying to raise new capital, become profitable for the first time and turn the page after a turbulent year-and-a-half. Juul says that it delegated decisions to independent directors and that it secured needed financing from investors who support the company’s mission of offering adult cigarette smokers a less-harmful alternative. Juul was once a vaping juggernaut and one of the most valuable startups in America. Tobacco giant Altria Group in 2018 invested $12.8 billion in Juul. Juul used nearly all of the cash from Altria’s investment to fund employee bonuses and shareholder dividends, including more than $2 billion to Valani and more than $1 billion to Pritzker. Since then, Juul has been beset by thousands of lawsuits over its marketing practices and embroiled in a dispute with federal regulators over whether its e-cigarettes can be sold in the U.S. Juul has denied allegations that it marketed its e-cigarettes to children and teens.
