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TheDeal: Bebo Founders Reclaim Company

Bebo filed for Chapter 11 protection on May 9.

According to court papers, the company lost more than $2 million over the past year and nine months because of falling revenue and has many outstanding liabilities. Revenue in 2012 fell to $1.22 million, from $2.28 million a year earlier.

A group of minority shareholders sued Criterion, majority owner Adam Levin, Bebo director Tristen Lazareff and Bebo on March 5, 2012, in the Superior Court of the State of California in San Francisco, alleging charges including breach of fiduciary duty, gross mismanagement, unjust enrichment, waste of corporate assets and abuse of control. The plaintiffs include Hecker Consultancy LLC, which owns 14.92% of Bebo; MXB, which owns 9.79%; and SV Angel LLC, which owns 1.96%.

The suit faulted the defendants' alleged operation of Bebo for more than 20 months without a shareholder or board meeting; alleged use of operating funds to pay Bebo staff that also work at Criterion; and alleged charging of unfair management fees and rent.

The action sought relief including restitution, unspecified damages and appointment of a receiver.

Ong was appointed as receiver on March 5. (The status of the remainder of the litigation was unclear from court papers.) A day later, Bebo Web hosting adviser Quality Technology Services Santa Clara II LLC threatened to terminate all of Bebo's services if the company could not pay $118,518 by May 10. Bebo owed the company for data services.

In its official schedules filed May 23, Bebo reported assets of $27,085 and liabilities of $1.76 million.

Matthew A Lesnick and William F. Govier of Lesnick Prince & Pappas LLP are debtor counsel.

Michael St. James of St. James Law PC represents MXB.

-- Written by Aviva Gat in New York

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