The Securities and Exchange Commission has opened a preliminary inquiry into Hampton Creek after it was accused of running a secret project to buy up its own mayonnaise product from stores.
Bloomberg, which first reported the news of the buybacks, now says the agency is looking at whether the startup inappropriately counted revenue from these purchases made with company money.
The scheme is said to have started in 2014 and was played out by undercover contractors hired by the company to buy up large quantities of Just Mayo – a mayonnaise product made by Hampton Creek that uses pea protein instead of eggs.
The SEC could not be reached at the time of publishing. However, the inquiry does not necessarily mean Hampton Creek will face formal charges. The agency’s inquiry is just an initial step to look into the matter.
“We’re aware of the informal inquiry and we’ll be sharing the facts, as opposed to the inaccuracies reported by Bloomberg,” Tetrick told Bloomberg in an e-mailed statement.
The news comes just days after founder Josh Tetrick revealed to employees the company was about to join the unicorn club at a $1.1 billion valuation, telling them the startup had raised a previously undisclosed $100 million in funding and that several more investors from Asia, the U.K. and Germany would be adding to the round, which would put Hampton Creek in the same category as other startups that have reached the one billion valuation mark. Though Bloomberg, which first reported the unicorn valuation story, also pointed out the startup stood to lose up to $63 million this year.
Hampton Creek has not returned our email over the SEC inquiry at the time of publishing but Tetrick has explained on his own site the buybacks were for “assessing the product from the customer perspective.”