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Sexual Harassment Scandal Brings Down Square COO

January 28, 2013

By Paul Thomson :: 5:06 PM

Keith Rabois resigns from SquareThe online and mobile payments startup Square has lost COO Keith Rabois today in the wake of a sexual harassment scandal at the company. Square was started by Twitter’s co-founder, Jack Dorsey.

Rabois began his tenure at Square as COO in 2010 and was instrumental in its recent grown from 30 employees to several hundred. The Internet entrepreneur and  angel investor was a former Paypal employee. He is claiming the accusations are false, and says he is being blackmailed.

“Last week, a New York-based attorney threatened Square and myself with a lawsuit. I am told this lawsuit would allege that the relationship was not consensual, and would go on to accuse me of some pretty horrible things. I was told that only a payment of millions of dollars will make this go away, and that my career, my reputation, and my livelihood will be threatened if Square and I don’t pay up,” Rabois wrote on his Tumblr blog.

He continued to explain the relationship in his post. “I realize that continuing any physical relationship after he began working at Square was poor judgment on my part. But let me be unequivocal with the facts: (1) The relationship was welcome. (2) Square did not know of the relationship before a lawsuit was threatened; it came as a complete surprise to the company. (3) He never received nor was denied any reward or benefits based on our relationship. And (4), I did not do the horrendous things I am told I may be accused of. While I have certainly made mistakes, this threat feels like a shakedown, and I will defend myself to the full extent of the law.”

Square released a statement saying that Rabois had “exercised poor judgment,” and that his ability to lead the company had been undermined.

The company was launched to assist small businesses in processing credit card payments through the use of a credit card reader attached to smartphones and tablets. Square entered the mainstream last fall when coffee giant Starbucks said it would shift all management of credit card payments to Square, and let customers pay by phone. Starbucks also participated in a funding round that valued Square at $3.25 billion, and sells Square card readers in some of its retail outlets.