Vonage goes on to add that "there is a risk that some third parties will not do business with us, that some prospective investors will not purchase our securities or that some customers may be wary of signing up for service with us as a result of allegations against Mr. Citron and his past SEC and NASD settlements. We believe that some financial institutions and accounting firms have declined to enter into business relationships with us in the past, at least in part because of these matters. Other institutions and potential business associates may not be able to do business with us because of internal policies that restrict associations with individuals who have entered into SEC and NASD settlements."

"While we believe that these matters have not had a material impact on our business, they may have a greater impact on us when we become a public company, including by adversely affecting our ability to enter into commercial relationships with third parties that we need to effectively and competitively grow our business. Further, should Mr. Citron in the future be accused of, or be shown to have engaged in, additional improper or illegal activities, the impact of those accusations or the potential penalties from such activities could be exacerbated because of the matters discussed above. If any of these risks were to be realized, there could be a material adverse effect on our business or the market price of our common stock."

The news comes just months after Vonage rival Skype was acquired by eBay ( EBAY) in a $2.6 billion deal widely criticized for its rich price tag. VoIP players like Skype and Vonage have grown fast in recent years, but their very success has prodded big rivals like AT&T ( T) and Verizon ( VZ) to roll out competing offerings, cutting into the upstarts' market opportunity.

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