A former Facebook vice-president and two prominent Toronto venture capitalists are being ordered to pay US$15.69 million for engaging in “conspiracy” and “unlawful conduct” around the 2012 sale of Xtreme Labs, a company that held a stake in Tinder.

The Ontario Superior Court of Justice ruled against Chamath Palihapitiya, Amar Varma and Sundeep “Sunny” Madra on Tuesday in a high-profile court case that pitted the Silicon Valley entrepreneurs against Toronto-based Extreme Venture Partners (EVP), led by longtime tech investors Ray Sharma and Imran Bashir and Bay Street veteran Ken Teslia.

The case captured the attention of Canada’s tech community for more than four and a half years. Palihapitiya is the CEO of Social Capital, which raised more than US$1 billion, and invested in companies including Slack and SurveyMonkey. EVP has backed early-stage companies that have become part of tech giants, including Google and Apple.

The defendants are being ordered by Justice Barbara Conway to pay US$3.36 million in damages and US$12.33 million in disgorgement of profits. In addition, Varma and Madra are required to pay $250,000 each for improperly setting up the Annex Fund, a competing investment fund.

“I have found that Chamath, Amar and Sunny worked together for Chamath … to acquire the shares of Xtreme Labs at an undervalued price and concealed an asset of the company from the selling shareholders,” Conway’s decision reads. “On the facts of this case, the plaintiffs have satisfied the elements of unlawful conduct conspiracy.”

The plaintiffs originally sought $200 million in damages and other fees. However, Megan McPhee, a principal at Kim Spencer McPhee Barristers, the firm representing Extreme Venture Partners, said she was “extremely happy” with the decision.

“It vindicates our clients’ position. It wasn’t seller’s remorse; they were wronged.” said McPhee. “It’s difficult to prove conspiracy. In doing so, the judge showed her distaste for the defendant and that they’re bad actors.”

Ira Nishisato, legal counsel for Varma and Madra, said his clients plan to appeal the ruling. “We are reviewing the decision carefully and will set out the grounds of appeal in our notice of appeal,” he said. “We have 30 days from the date of the decision in which to file our notice.”

Lawyers for Palihapitiya did not immediately reply to requests for comment.

According to the judgment, the conspiracy centred around a series of meetings in 2011 where Varma and Madra told the plaintiffs and the EVP board that Xtreme Labs’ growth was poised to slow down, and that they should find a seller for the company. They forecast annual revenue of $12 million and 11 per cent growth, compared to 138 per cent growth the year before.

“The actual revenues for Xtreme Labs for [fiscal year] ended September 30, 2012 were $17.2 million, approximately 43% higher than the forecast provided to the board in November 2011,” the decision notes.

Madra and Varma had been in contact with Palihapitiya around that time, and were searching for a buyer together. In presentations to potential buyers and investors, the defendants described Xtreme Labs as a “world leader in application development and integration,” with revenue for 2012 projected to be $20 million with $5 million in profit. The defendants never told the plaintiffs or the board that they had presented alternative projections—which turned out to be accurate—to third parties.

Xtreme Labs was sold to E1 Investco, Palihapitiya’s personal investment company, for US$18 million in August 2012. Palihapitiya got Divesh Makan, the manager of his family office, and the late Dave Goldberg, former CEO of SurveyMonkey and husband to Facebook COO Sheryl Sandberg, to invest alongside him. Mandra and Varma remained with the company.

The firm was then sold to San Francisco-based GoPivotal—now called Pivotal—for US$60 million in October 2013, minus some of its assets, including a 13 per cent stake in Hatch Labs, which created the dating app Tinder. That Hatch holding was sold to InterActive Corp (IAC) for US$30 million in March 2014.

The judge accepted the plaintiffs’ claim that the defendants concealed their equity in Hatch.

According to the decision, Palihapitiya emailed Madra to talk about buying Xtreme Labs on Feb. 1, 2012. The judge did not accept the defendants’ evidence that the three had not been in contact about the acquisition between that meeting and a dinner on March 20, after which they drafted Palihapitiya’s offer.

She also noted that Varma did not inform the board of Xtreme Labs that he and Madra had been working on the offer with Palihapitiya when he presented it to them the following day. “Rather, he and Sunny acted as though they had just received an unsolicited offer from Chamath,” according to the decision. “They immediately sent a slide deck recommending the offer. They pressured the plaintiffs intensely over the next few days to accept the offer.”

Throughout the case, the defendants and their counsel dismissed the allegations against Madra, Varma and Chamath as a case of seller’s remorse. However, the plaintiffs claimed that they were intentionally misled; that the defendants knew Xtreme Labs would be continue to be successful.

The judge agreed with the plaintiffs, citing an email from Palihapitiya to his friend Phil Deutch, in which Palihapitiya wrote, “25% net cash margins, 100% YoY revenue growth — should do $35-40M next year. We bought it for $16M. Yum yum!!!!”

Palihapitiya said in court that the numbers were a joke. “I do not accept his evidence that these figures were all made up as a joke among friends,” the judge ruled, noting that the numbers were closer to company’s actual growth than the numbers given to the board.

In her decision, Conway said the defendants were motivated to buy out their partners because of pressure to give the plaintiffs equity in Xtreme Labs back in 2007. “Amar and Sunny were discontent with their compensation and equity in Xtreme Labs and were looking to increase it,” Conway wrote. “They felt their hard work was not being recognized. They resented some of the controls Ray was trying to impose on them.”

Conway said that Palihapitiya, a long-time friend of Varma and Madra, “knew that the mobile world was about to explode … Chamath’s offer to buy the company was Amar and Sunny’s opportunity to increase their equity and compensation in the business they co-founded and to reap the rewards of their hard work.

The judge found that Varma and Madra set up an investment fund called the Extreme Venture Partners Annex Fund and led other companies to believe it was a part of EVP, despite never telling the plaintiffs that the fund existed. She also found that they were in violation of their shareholder agreements, which barred them from setting up a second fund without the consent of the plaintiffs.

“I do not accept Amar and Sunny’s version of events. The documentary evidence shows that the parties were planning to establish additional funds under the Extreme Venture Partners brand,” reads the decision.