A Venture Capital Firm Is Accused of Manipulating How Much Companies Are Worth

In early June 2026, Brendan Foody, who works at an AI recruiting startup called Mercor, made a public accusation against Sequoia Capital, one of Silicon Valley's most powerful investment firms. Foody claims that Sequoia used a practice called "dual-pricing" to artificially inflate how much they said companies were worth. The accusation was reported by TechCrunch on June 9, 2026.

What Does "Dual-Pricing" Mean?

Here is the simplest way to understand it: imagine a company sells shares to investors at two different prices in the same fundraising round, but only announces the higher price publicly.

Let's say Company X sells shares to one group of investors for $100 per share. But in the same round, they sell nearly identical shares to another group for $60 per share — perhaps through a separate investment structure. If the company then publicly announces a valuation based only on the $100 price, the headline number does not match what the shares actually cost in the real market.

Foody's accusation is that Sequoia may have done something like this to make companies in their portfolio look more valuable on paper than they actually were.

Why This Matters

The ripple effects are significant in two directions.

For company founders, an inflated valuation at one funding round becomes the baseline for the next round. If a founder accepts investment terms based on an artificially high valuation, their company may face problems later. When they try to raise money in the next round, investors may refuse to pay as much as expected — not because the company got worse, but because the earlier valuation was never honest. This can trigger a "down round," where new investors pay less per share than previous ones, which damages existing shareholders.

For the investment firms that provide capital to venture funds, the problem is different. These large institutional investors rely on honest valuations to know whether their money is being managed well. If valuations are inflated, they cannot accurately calculate returns or plan their own finances. U.S. regulators have been paying closer attention to whether investment firms report valuations fairly, particularly after problems that surfaced between 2022 and 2024.

The Broader Picture

The venture capital world has been especially heated in the recent push to fund AI companies. When many investors compete to put money into the same hot companies, prices can become inflated. Everyone wants to claim they backed the next big thing, and that pressure can lead to less honest pricing.

This is not the first time the investment world has faced this problem. In the late 1990s, internet startups went public at huge valuations on very little evidence they would make money. The difference now is that the methods are more complex, harder to see, and the rules around disclosure are stricter. That does not necessarily make the situation safer — it just makes the problems easier to hide.

What Sequoia Says

Sequoia Capital has not publicly responded to Foody's accusation. Large investment firms often stay silent when facing public complaints, especially when facts are disputed. What matters next is whether regulators like the Securities and Exchange Commission or the Financial Industry Regulatory Authority investigate, or whether the investment firms that provide money to Sequoia decide to conduct their own audit.

Sequoia operates through many different funds around the world. Any investigation into dual-pricing would need to identify exactly which fund, which company, and which funding round is involved — details that Foody has not yet fully made public.

What Happens Now

The accusation's impact depends on several things: whether Foody provides more evidence, whether other insiders confirm the claim, and whether the large institutions that gave money to Sequoia's funds choose to investigate how their valuations are being calculated.

Going public with accusations like this carries real risks for the accuser. Founders who criticize investors can find themselves quietly excluded from future funding opportunities in an industry built on personal relationships. The fact that Foody used his name publicly suggests he believes the issue is serious, though it does not yet tell us whether his evidence is strong.

The real significance of this accusation may go beyond whether Sequoia faces penalties. The deeper question is whether it will push the entire venture capital industry to be more honest about valuations. If artificial pricing is common, it clouds the picture for everyone — from founders planning their future to the families and institutions investing billions of dollars. For the AI investment boom to avoid the painful crash cycles that have happened before, the numbers investors cite need to reflect reality.

Foody has started a conversation that the industry needs to have.