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A battle for control now has Onyx in legal limbo
James Khatiblou , the proprietor and CEO ofOnyx minibike , was see his e - bike startup fall apart .
Onyx was being evict from its warehouse in El Segundo , near Los Angeles . The troupe ’s amateur flyer were stacking up . Its chief operating officer had dead resigned . A shipment of around 100 CTY2 dirt bikes from Chinese supplier Suzhou Jindao was check , and customers were start to demand repayment — a major problem considering Khatiblou already owe both lenders and shareholders a batch of money .
Khatiblou , known for his strong and outgoing personality , was dread and stressed , according to interviews with people who worked alongside him . In the waning months of 2023 , he was so distracted by the startup ’s increasing debt and legal problems , he was ineffectual to watch through on basic tasks . At the same time , his health was deteriorating , according to his mother , Diane Khatiblou . The vibrant and alive world with the toothy grin was hold trouble breathing and even walk , she said .
Then Onyx ’s problems intensify in a elbow room nobody expect .
At 37 years honest-to-god , Khatiblou — who loved riding the halfpipe at the party storage warehouse and journey the world — decease unexpectedly . The Los Angeles County Coroner ’s Office determined Khatiblou suffered a pulmonary embolism , list deep vein thrombosis as a secondary crusade .
His last on December 12 , 2023 added a new stratum of uncertainty to the future of Onyx and its plus .
Khatiblou left behind no will and no sequence plan — only million of dollars in debt and interrogation from staff , creditors and customers about how to proceed when the sole owner of a companionship buy the farm .
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Today , no one owns Onyx Motorbikes , which means all operations — customer deliveries , payment to suppliers and creditors — have ground to a halt . Oxygen Funding , an Orange County - ground creditor to which Onyx owes around $ 2.2 million , is petitioning the Los Angeles County probate court to become the administrator of Khatiblou ’s estate .
“ [ Onyx ] had such good prospects . It had such a loyal rooter theme and such a good merchandise , and it was all just basically put in limbo the solar day James passed away , ” Adam Lomax , principal executive policeman of Oxygen Funding , told TechCrunch . “ And it has rest in oblivion all the way up to the percentage point where we are now . ”
As decision maker , Oxygen could facilitate put some pieces together . But numerous legal wrinkles imperil to derail those plans .
A struggle between Oxygen Funding , two former shareholders and Onyx ’s Chinese parts supplier is now irritate over who controls Onyx ’s persist assets — bike , charger and barrage — and who gets to be made whole first .
Based on interviews with creditor , lawyers and multiple former employees at Onyx , the company ’s story highlights how complicated thing can become if the lonesome owner of a business does n’t make a programme for what happens when they die .
A life changed by $1
Khatiblou did n’t produce Onyx Motorbikes . Its laminitis isTim Seward , who is now VP of product and conception at atomic number 99 - bike companyUbco , and who initially just wanted to make a nerveless electric automobile moped to impress his friends .
“ I grew up loving Volkswagens and vintage cars and motorcycles , ” Seward recite TechCrunch . “ I get it on that elan and desire to make an electric mope reading of that . ”
Seward bug out building out what would become the prototype for Onyx ’s popularRCR electrical grunge bikein 2016 while a designer at LG Electronics , where he work alongside Khatiblou .
“ The look of the bike is actually an bird of Jove with its extension close down together as it dive dud , ” Seward told TechCrunch . “ The two side panels are the wing . The wood part is kind of the body or the trunk , and the seat would be the tail of the eagle . ”
As Seward drove his bike around San Francisco , people kept stop him to ask where they could get one . After saying , ‘ It ’s not for sales event , ’ enough times , Seward finally decided that maybe it should be .
He launched anIndiegogo campaignfor Onyx Motorbikes in 2018 , raising nearly $ 1 million . Onyx promised to deliver American - made bicycle , which Seward said would help oneself the fellowship keep up better calibre control , create local jobs and stave off import tariffs .
The bikes were an instant smash . multitude love the 1970s and 1980s prayer of the innovation , the wooden organic structure , the made - in - the - USA - style . And , most significantly , the bikes could shred .
Seward employ out a team of technicians to help him fulfill his grow lodge count . Khatiblou , who lived near Onyx ’s San Francisco shop class , would often add up in after his newfangled day job at Amazon to squander off steam . He even built his own Onyx bike after bribe one on Indiegogo , tell Seward , who shared a video that showed Khatiblou ’s excitement for his novel toy .
By other 2019 , Seward was getting burned out with the responsibility of running a business . He wanted to focus on designing and building wheel , not address with purchase accord and paysheet . He started shop for a uniting .
What he end up getting was an acqui - hire deal from Bird , the struggle shared eastward - water scooter ship’s company . alternatively of acquire Onyx and its assets , Bird paid Seward a stumblebum aggregate in the 100 of one thousand to get along and figure out for them full time . As part of the deal , Seward had to find a replacement for himself at Onyx . He ended up landing place on Khatiblou , who had offer to quit his Amazon job and maltreat up into the CEO role .
Eager to unload the business responsibility of Onyx , Seward sold Khatiblou his society in May 2019 for $ 1 .
“ My tax advisor had say to do that to avoid paying taxes , or something like that , but also James did n’t have a sight of money at the time , ” aver Seward . “ Mainly , it was because of what Bird was extend me , which more than add on what I thought I should have been pay for the troupe . ”
Khatiblou stumbled a bit when he take over the business , says Seward . After all , he had never run a companionship or dealt with e - commerce before . But it was clean-cut he was devote to running Onyx and become coolheaded bicycle into the hands of loyal customers .
“ He lived and catch one’s breath Onyx , ” Diane Khatiblou told TechCrunch . “ It was everything to him , and he put everything into it . ”
While Seward had no prescribed ties or claims to Onyx at this point , he continued to notify Khatiblou as a acquaintance and to produce content for Onyx ’s societal media . That relationship continue until the two shine out over a dispute regarding new shareowner Khatiblou took on .
Per Seward ’s retelling , Khatiblou had settle to bring on backers who would endue meg in the business sector . Despite the potential fiscal upside of the arrangement , Khatiblou would n’t cease kvetch about how the deal would reduce his ownership in Onyx . Seward — frustrated by his supporter ’s doubts — took a step back from Khatiblou and Onyx , doubling down on his work at Bird make unexampled east - scooter and eastward - motorcycle models .
A web of legal and financial troubles
As a first - prison term business owner navigating the suddenly hot e - bike space , Khatiblou made some mistakes . He signed himself as the personal guarantor for lending agreements ; and he overspend on supply and method of accounting costs . And even toward the end , as the business spiraled , Khatiblou grow down what could have been a lifeline : a buyout offer from a rival .
He also mismanaged the family relationship with his two shareholders , who bought into the business and would eventually action him : Kenneth Ames , aformer engineering and sourcing executivein the go inflammation business based in Simi Valley , and Troy Smith , aself - employed accountantbased in Carlsbad .
In September 2019 , through a “ shareholders concord , ” Ames purchased 2.2 million part of common stock in Onyx Corp. , and Smith purchase 800,000 , leaving Khatiblou the remaining 5 million shares . TechCrunch was unable to watch the original buck amount of these fairness investments . Under an “ operating agreement , ” Ames and Smith also collectively held a 37.5 % percentage pursuit in Onyx LLC .
Onyx file as a corporation in California and Delaware in 2018 . The freestanding LLC entity was mark up in California a year afterward , when Ames and Smith occur onboard . Typically , a company will set up a corporation in addition to an LLC to sequester liabilities , for more elastic tax planning , to customize ownership structure or to protect assets listed under the LLC .
TechCrunch was unable to obtain a copy of Onyx LLC ’s operating agreements with Ames and Smith , which might have given the shareholders the authority to participate in 24-hour interval - to - day management and operation of the business .
The two did not reply to reprise requests from TechCrunch for more info , but it come out they did have a hand in company affairs — at least , in the origin . Seward told TechCrunch that , while he was n’t aware of Smith at the prison term , he had met Ames and thought he was “ a good guy . ”
“ He was smart and knew business concern and that ’s what Onyx needed , ” tell Seward , noting that Ames helped heighten the fabrication process he had embark on . “ From my position , he was relieve oneself Onyx healthy . ”
A month after contract the operating agreement , Khatiblou signed atrademark grant agreement , transfer possession of Onyx ’s stigmatization from Onyx Corp. to Onyx LLC .
Khatiblou could n’t throw off his mistrust of his fresh stage business spouse , however , according to the account of people airless to him at the time . Less than a class after Ames and Smith had become shareholder , Khatiblou get action to take by their decision - making powers . In August 2020 and December 2020 , Khatiblou unilaterally remove Ames and Smith , severally , as officers , directors and managers of the Onyx companies .
Around the same fourth dimension , Oxygen Funding , an invoice factorization company that allow cash flows to small- and average - size of it businesses , entered the delineation . Khatiblou and Oxygen signed a craft payable agreement in December 2020 . Under the agreement , which TechCrunch has see , Oxygen purchases bikes and parts directly from suppliers and vendors on behalf of the Es - bike company , and Onyx pays it back plus various fees .
Per the term of the agreement , Onyx ’s supplies and assets would be held as collateral . Khatiblou was personally liable if Onyx failed to make payments .
Will Drewery , founder and CEO ofDiagon.ai , a inauguration build a platform for equipment funding , told TechCrunch that creditors ’ fees are moderately standard in the industry . Signing on as a personal warrantor , however , is not .
“ It ’s legal to do it , but it ’s dumb , ” Drewery tell TechCrunch . “ And places like Y Combinator , Techstars , any consultant or investor will tell you , like , ‘ Are you an moron ? Why would you sign a personal warranty ? Do n’t ever do that . ’ ”
Clara Brenner , co - founder and managing partner of VC firm Urban Innovation Fund , had a similar sentiment .
“ Personal liability … is something you actively go from , ” Brenner told TechCrunch . “ It ’s something we powerfully deter our founders from doing because most of the clip they ’re not exceedingly sophisticated about these mechanisms , and it ’s just really high-risk . ”
Oxygen Funding ’s Lomax , for his part , said cook the borrower a personal surety is standard protocol when a business does n’t have enough assets to back up the credit line .
But now that Khatiblou has pass away , all Oxygen and other creditor can fall back on is whatever einsteinium - bike supply stay . Oxygen and Ames , together with Smith , are now duking it out for approach to those assets .
The CEO was slipping
Days before Khatiblou died , Mig Cernicky , Onyx ’s buying director , said his CEO was slipping .
“ Several of us were work closely with James to endeavor to get him on the ball … and take upkeep of these legal ouster notice , ” Cernicky recount TechCrunch . “ At that gunpoint , his mental capacity had declined to the point that he was having a hard time even carrying on a simple conversation . ”
Diane Khatiblou secern TechCrunch that in addition to stress , her son was also in and out of the infirmary and was “ very ominous for a couple of months before he die out . ” He was initially name with pneumonia . It turn out that it was a roue clot that induce Khatiblou problem respiration and difficulty walking to the point that he started using a cane , agree to Diane Khatiblou .
“ I did n’t realize how much pain he was in because , of row , he was trying to extract himself up and not plain , ” she order .
Realizing that Khatiblou was n’t in a set state to handle the press matters at hand , Cernicky said he started pressuring Onyx ’s COO , Tay McDaniel , to step up — to which she replied with a resignation alphabetic character .
At a exit for what to do and desperate to endeavor to carry through Onyx , Cernicky muster in a written document on December 8 naming himself as president and COO of Onyx Motorbikes for Khatiblou to sign .
“ It is the last document that James signed , ” Cernicky allege .
Khatiblou conk four day later , and Cernicky tread in as acting chief executive officer to endeavor to keep Onyx live .
Khatiblou was unmarried and had no baby when he passed away , so his mother , Diane Khatiblou , became his sole successor .
That did n’t mean she was automatically in complaint of Khatiblou ’s asset , which include Onyx — only that she had first right wing to them . According to the California Probate Code , in case like this , the judicature require to appoint an administrator to decide what to do with the caller . After ab initio petition a Los Angeles probate court in March 2024 to step in as decision maker of her son ’s land , Khatiblou ’s mother reversed class and withdraw her petition .
Now , Oxygen Funding is petition the court to become the administrator , its primary executive Lomax told TechCrunch . That ’s one manner for the creditor to ensure that it get its money back . Lomax would n’t confirm whether Oxygen would sell troupe assets to pay itself and other creditors back or find someone else to pick up the pieces and keep the company alive .
Creditors become secure creditor when they file a Uniform Commercial Code ( UCC ) physique . Oxygen file away one of these with Delaware ’s Secretary of State in December 2020 , which the creditor says draw it first in line to be paid back its $ 2.2 million . There are other creditors hold off in melodic line too . JP Morgan Chase claim to be owe $ 43,323.29 , according to probate will court papers . In mid - May , a customer who had purchased an RCR dirt bike and some accessories back in November 2023 also filed as a creditor in probate will court to get his $ 6,019.97 back . source say Shopify , the political platform under which Onyx made its sales , is also owe money but has yet to file a claim .
Ames and Smith are also claiming to be creditor . The pair filed UCC forms in California for both Onyx Motorbikes Inc. and Onyx Motorbikes Global Holdings LLC on May 26 , 2021 — the day after Khatiblou sign a village correspondence that would see him buying back their shares for some $ 10,000 per calendar month over the span of 80 month .
By filing those UCC configuration , Ames and Smith essentially turned a part buyback into a loan agreement — and they are hold Onyx ’s plus , “ tangible and nonphysical , ” as collateral against their security interests .
Counsel for Ames and Smith severalise TechCrunch that Onyx had breached its refund agreement when Khatiblou pass aside and could no longer stay on buying back percentage .
“ Accordingly , Mr. Ames and Mr. Smith , as secured creditors , are ask steps to forbid on Onyx LLC ’s asset , ” reads a command from the lawyer .
The two shareholders earlier this calendar month pass card of a lien sale to Khatiblou ’s landed estate and acting CEO Cernicky , according to several people familiar with the matter .
The posting advises that Ames and Smith plan to sell Onyx LLC ’s collateral sometime on or after May 21 . In the poster , collateral is delimitate as a general all - plus description . At the meter of publication , none of Onyx ’s quarrel asset had been sell .
In improver to Ames and Smith , their counsel did not respond to TechCrunch ’s postulation for more information , like what asset they have in their monomania and plan to sell .
E-bikes stuck in storage
Since there ’s no money in Onyx ’s coffers , the only way for Oxygen or anyone else to be made whole is to sell whatever assets and supply stay . atomic number 8 posit that since it paid for Onyx ’s supplying and since the e - bike caller defaulted on its payment , it is the rightful owner of any rest asset .
There ’s just one problem . Those asset are being held split between at least two company .
Oxygen is in possession of about 100 batteries and chargers as well as 25 CTY motorcycle , confirmed Lomax . The remaining 74 bicycle are in a storage warehouse used by Suzhou Jindao , the e - wheel fabrication producer in Suzhou that was Onyx ’s supplier . Suzhou Jindao is hold off for a Margaret Court order that directs where the inventorying should go .
The Chinese supplier has also been pressured by Ames and Smith to hold onto the bike and ascertain they do n’t make it into Oxygen ’s hand . In an email that TechCrunch has viewed , counsel for the two investors involve the provider to check off on delivering the bikes “ in light of the lien held by Troy Smith and Ken Ames . ”
With asset cleave between two parties and a web of effectual claims , it ’s ill-defined precisely who will be the master — or if Onyx will ever live again .
There are several possibilities . Ames and Smith could use the hallmark appointment to block Oxygen and others from trade Onyx - branded gear . The twosome could expend the maneuver to not only wrest control of the assets but as a scheme to bring the Onyx marque back .
To make topic more tricky , Ames and Smith — who claim to be creditor per the parcel buyback agreement — now appear to have regained full possession of their shares , making them active shareowner . This is because their part were being hold in escrow while Onyx was paying them back ; when Khatiblou die and Onyx defaulted on payments , those part moved out of escrow , which Smith has confirm to TechCrunch .
“ Either you ’re an owner or you ’re not an possessor , ” said Lomax . “ Which is it ? Because if you ’re an proprietor , then we need to let the cat out of the bag to you about how Oxygen Funding gets repaid . ”
