A Delaware Chancery Court judge's finding that the former CEO of payment-processing company Plimus Inc. had defrauded a private equity firm in the run-up to its $115 million sale in 2011 has led to the executive's resignation from the company he had been leading.

Isreali-based media firm Taptica International Ltd said late Monday that Hagai Tal was resigning after Vice Chancellor Sam Glasscock III in his opinion found that the executive had hidden key information from buyer Great Hill Equity Partners in order to position himself as chief executive of post-merger company BlueSnap Inc.

In a regulatory filing with the London Stock Exchange, Taptica, which is not connected to Plimus, said that Tal had tendered his resignation, and the board was deciding how to act. Glasscock had said in a 153-page post-trial ruling that Tal stood to personally benefit from the merger's completion and that his misrepresentations were material to the deal.

“Tal wanted the merger to go forward, as it had advantages for him personally—he could become CEO of a better-capitalized company and would personally benefit from the earn-outs and the liquidity that he would realize from the sale,” Glasscock wrote.

The decision did not address damages, though Glasscock said Great Hill and BlueSnap would be able to seek capped indemnification stemming from the fraud.

An attorney for Tal declined to comment Tuesday afternoon.

Taptica said in its filing that the plaintiffs “are entitled to restitution for breaches of certain representations and warranties.”

Great Hill and BlueSnap sued Tal and other executives in September 2011, about one year after the deal closed, alleging breaches of representations, fraud and aiding and betting in connection with the sale. In its complaint, Great Hill argued that Tal and his co-defendants knew that Plimus was on the verge of losing a second major payment processor that was central to its business model but failed to disclose that information as Great Hill did its due diligence.

PayPal eventually cut ties with Plimus after the deal was finalized, citing excessive “chargebacks” that were being passed along to banks for subpar products Plimus was selling to consumers. According to court documents, PayPal made numerous threats to end its relationship with Plimus in the two months leading up to the merger, though those concerns never reached Great Hill.

On Monday, Glasscock said that only Tal was involved in making the misrepresentations, and no other Plimus executives were implicated in the scheme. In his opinion, Glasscock said Tal told Irit Segal Itshayek, Plimus' vice president of financial strategy and payment solutions, early September 2011 that he would disclose the issues to Great Hill but never did.

“Given Tal's assurance, Itshayek had no reason to believe that, to the contrary, these facts would be withheld from Great Hill. For this reason, Itshayek cannot be charged with knowledge that Tal ultimately did not make the necessary disclosures,” Glasscock said.

Around that time, Plimus was facing similar pressure from Paymentech, LLC, one of the company's other processors, which terminated its relationship with Plimus earlier in the year. Great Hill accused Tal, Itshayek and a unit of Pennsylvania-based investor Susquehanna Growth Equity, LLC of removing key details from a disclosure schedule that accompanied the initial merger agreement.

Glasscock found that the defendants were recklessly indifferent to the omission, but ruled the misrepresentations to be immaterial in the context of the deal.

Great Hill, however, had justifiably relied on Tal's statements regarding PayPal, and Glasscock said damages would be determined following further proceedings. Under the terms of the merger agreement, Glasscock said Great Hill was entitled to indemnification based on the breaches, but the ultimate amount would be limited to funds that the companies had already set aside in escrow.

Gregory V. Varallo, who represented Great Hill and BlueSnap, said he was “pleased with the court's finding that there was fraud with the Plimus transaction.”

The plaintiffs were represented by Varallo, Rudolf Koch and Robert L. Burns of Richards, Layton & Finger in Wilmington and Stephen D. Poss and Adam Slutsky of Goodwin Procter in Boston.

Tal was represented by Michael K. Coran, William T. Hill, Monica Clarke Platt and Gregory R. Sellers of Klehr Harrison Harvey Branzburg in Philadelphia and David S. Eagle and Sean M. Brennecke from the firm's Wilmington office.

The case is captioned Great Hill Equity Partners v. SIG Growth Equity Fund.