Is Sequoia Interfering with Portfolio Company Firesale?

Intriguing legal kerfuffle in Israel, involving Sequoia Capital and portfolio company SDT, a five year-old maker of what one report described as a “backpack-carried digital nose that sniffs out improvised explosive devices.”

SDT was founded five years ago via a merger between M.S. Tech and Israel Military Industries, and has since raised around $6.5 million from Sequoia’s Israel affiliate and individual angels like Tom Unterberg. But it has since fallen on hard times (financial crisis and all), and virtually ceased operations last summer.

SDP’s court-appointed receiver wants approval to sell SDT’s assets for a bit under $1 million to U.S.-based Rapiscan (subsidiary of OSI Systems), but claims that Sequoia and two other shareholders are interfering with the sale. Not to get a higher price, mind you, but to keep the price low (i.e., they’re essentially being accused of conspiring with Rapiscan).

No real explanation of possible motives here, nor much evidence beyond the accusations. Really quite odd. Sequoia declined to comment.

If you read Hebrew, here are some supporting docs. This story was originally reported by Guy Grimland in The Marker.