A Nairobi businessman has sued Kytabu Company Limited, a technology startup co-founded by entrepreneur Tonee Ndungu, alleging he was defrauded of Sh6.3 million in a fraudulent share transfer scheme.
The investor claims he was misled into putting money into Kytabu through what appeared to be a legitimate investment arrangement, only for it to turn out to be a well-orchestrated scam.
A Promising Investment Gone Wrong
According to court documents seen by this publication, negotiations between the complainant and Kytabu began in January 2025. At the time, the company widely regarded as one of Kenya’s promising education technology (edtech) ventures was seeking additional capital to expand its digital learning platforms.
After several meetings, both parties agreed that the businessman would invest Sh5 million in exchange for a 7.5 percent stake in the company, equivalent to 75 ordinary shares out of 1,000. The deal was formalized through a convertible loan agreement signed on February 10, 2025, and witnessed by both sides.
Between January 31 and February 10, the investor transferred the full amount to Kytabu’s Stanbic Bank account in Karen, Nairobi, through four equal payments. Kytabu’s management then assured him that their legal counsel would process the share transfer and update the company’s register to reflect his ownership.
By February 20, the investor had submitted all required documents to complete the transaction.
Silence and Broken Promises
However, the optimism was short-lived. In a statement filed by Mumbi Karoki and Company Advocates on July 9, 2025, the businessman claims he has since been “kept in the dark without any income or involvement whatsoever in the operations and running of the business.”
Weeks allegedly turned into months without communication from Kytabu. The investor accuses the company and its directors of ignoring calls, emails, and reminders, and of failing to either transfer the agreed shares or refund his money.
He is now seeking court orders compelling Kytabu to honour the share transfer agreement or refund the Sh6.3 million, including interest and legal costs.
Questions Over Startup Governance
The case has stirred conversation within Kenya’s startup ecosystem, raising concerns over corporate governance, investor protection, and transparency among emerging tech firms.
Kytabu, co-founded by Tonee Ndungu, gained recognition for its mission to improve access to learning materials through digital platforms and mobile tools. However, the ongoing legal dispute now threatens to tarnish the company’s reputation and highlight the risks investors face when engaging with privately held startups.
Neither Kytabu nor Tonee Ndungu has publicly commented on the allegations.
A Costly Lesson for Investors
For the complainant, what began as a promising opportunity to invest in Kenya’s digital education future has turned into a costly lesson in corporate trust and accountability.
The case underscores the importance of due diligence and transparent governance as Kenya’s innovation economy continues to attract local and foreign investors eager to tap into its fast-growing technology sector.
