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The future of Hawaii’s young tech industry was at the heart of a tech town hall last week. Many of the 50 or so attendees were left wondering whether Mbloom, a Maui-based venture fund, would either become the poster child for Hawaii’s burgeoning success or its potential source of implosion.

The town hall meeting was hosted by Arben Kryeziu and Nick Bicanic, founders of Mbloom, at The Box Jelly in Kakaako.

Karl Fooks, president of the Hawaii Strategic Development Corporation (HSDC), co-hosted the event. (The town hall in its entirety can be watched .)

Concerns arose earlier this month when Civil Beat and others reported a potential conflict of interest in Mbloom’s first round of investments, which involved public HSDC funds.

At the center of the controversy is a revealing Mbloom’s invesment in Flikdate, a mobile phone-driven dating service, and Ozolio, a live webcam service.

“With a 500k initial investment in Ozolio and Flikdate, Mbloom’s presence in the venture capital arena is solidified,” according to the release. “Mbloom’s first fund, Mbloom1, is a ten million dollar fund that closed at the beginning of 2014, and fundraising for Mbloom2 is currently underway.”

Jason Ubay, reporter at Pacific Business News (PBN), about the investments. According to Ubay’s story: “Kryeziu said decided to invest in the two startups because they were familiar with their work, having identified them as seed portfolio companies when mbloom was seeking investors.”

“It would be a lot easier to invest in a California fund, but that wouldn’t be as good for Hawaii.” — Karl Fooks, HSDC

Omitted from both the press release and Kryeziu’s PBN quote is the admission that Flikdate and Ozolio are companies owned by Kryeziu and Bicanic.

“Familiar with their work,” in this context, is a slight understatement.

“This sounds like deliberate misdirection from a company with $5MM of public money,” writes , owner of local tech company, Ikayzo. “I’m not saying that was the intent, but it is clearly the appearance.”

 Clearing the Air: An Apology

In response to public concern, Kryeziu, Bicanic, and Fooks called a town meeting to apologize for the poorly written press release and to reassure the tech community that investments in Flikdate and Ozolio were diligently reviewed prior to committing funds.

Mbloom’s LP committee, which includes Fooks, Devon Archer of Rosemont Seneca Technology Partners (RSTP), and an undisclosed third party, reviewed the investments independently of Kryeziu and Bicanic.

According to Fooks, the committee members were fully aware of the relationship between Flikdate, Ozolio, and Mbloom’s founders.  In fact, initially, RSTP was more interested in investing directly in Flikdate and Ozolio, but Kryeziu convinced them to invest in the fund instead.

“I just want to make it clear…we were aware of the companies that Arben and Nick were involved with,” “They were companies that existed before the existence of the fund and in large part they were the reason we were able to form the fund because investors were interested in those companies.”

Since the creation of the $20 million fund for the in 2013, Fooks said he’s faced significant difficulty finding private investors who are willing to take the leap and invest in Hawaii venture funds like Mbloom.

Leveraging Flikdate and Ozolio to catalyze growth, even if it incites a mini-PR snafoo, is, perhaps, a small price to pay.

“It would be a lot easier to invest in a California fund, but that wouldn’t be as good for Hawaii,” Fooks said after the meeting.

A Lesson in PR

As for the misleading press release, Kryeziu was apologetic. “I didn’t even read it,” he said. “If I could go back and do it again, I would.”

“We never intended to hide anything,” Fooks said. “It was an unfortunate oversight and a mischaracterization of how the events took place. (It was) a press release that went out in a hasty manner, and that was the source of a lot of confusion, and I apologize for that.”

“If we could go back and do it again, it would be handled very, very differently,” Bicanic said.

In the hopes of further repairing community faith, Mbloom used the venue to announce that Pono Shim, CEO of Enterprise Honolulu, will serve in a volunteer advisory capacity to Mbloom’s initiatives moving forward.

In a public statement, Shim wrote, “I believe we have an opportunity at hand that can lift us all in the technology sector.  We need as many successes as we can find and I intend to assist to include opportunities for us all to dream and risk.”

Potential Rupture of Trust

Weary of Mbloom’s self-funding, many community members dug into Kryeziu’s past.

A cursory Google search yields — pardon the pun — curious fruit: Kryeziu’s project in 2004, CherryOS, a piece of software owned by Maui X Stream and built by Kryeziu, to contain extensive amounts of code stolen from PearPC, an open source project licensed under GNU GPL. Both CherryOS and PearPC were early PowerPC G4 processor emulators for Microsoft Windows.

Upon being , Kryeziu candidly said, “I messed up.”

“CherryOS is the gift that keeps on giving,” he joked.

Kryeziu pointed to about the mishap where he admits, “I recruited help from an offshore company to meet tight deadlines. It was discovered after the release to have GPL code within it.”

But the story isn’t quite so simple. Perhaps another poorly handled instance of PR, Kryeziu initially told Wired that he in four months.

“If we could go back and do it again, it would be handled very, very differently.” — Nick Bicanic, Mbloom

Later, after controversy struck, Kryeziu pinned the :

Kryeziu said the inclusion of PearPC code was the fault of one of his programmers, who is no longer with the company. “I fired his ass,” Kryeziu said.

Only later did he point the blame at an outsourced company, presumed to be India-based company Comsdev, who, according to Kryeziu in , took Maui X Stream’s money and never gave Kryeziu direct access to the source code, only the compiled builds of CherryOS.

In a written by Micheal Bell (the blog post is no longer published but available via PDF from docstoc), Elance records prove Kryeziu hired Comsdev in April of 2004, which would fit with the four-month build period Kryeziu initially attributed to himself.

Given that Kryeziu is likely telling the truth about Comsdev, it’s puzzling that he didn’t immediately disclose the mistake instead of pinning the blame on a phantom employee.

More intriguing is the fact that, in 2004, both CherryOS and PDFConv (initially called Mbloom PDFConv) were available for download from the mbloom.com domain. Only later was CherryOS removed from mbloom.com and attributed to Maui X Stream.

Prior to the town hall, I was able to review the full history of mbloom.com from the . The domain has since started .

, Kryeziu said he “put the content on (mbloom) as a placeholder. And when I resigned from the company in 2005, I made sure to take the mbloom domain back because I wanted to reuse it in the future.”

PDFConv also sparked controversy after its release. According to Michael Bell, a significant amount of code was stolen from PDF2HTML, another product licensed under GNU GPL. From Bell’s blogpost:

“Ryan Thoryk…ran a DIFF between the source of PDFConv and PDF2HTML (where you take two files, or sets of files, and compare them together so you can see what the differences are) and it became obvious Arben had simply stripped out the original copyright notices within verypdf.com’s code and posted it as his own.”

Aqua Connect: A CherryOS Ruse?

In 2011, Aqua Connect filed a claim against Krezyiu’s company, Code Rebel, stating that Vladimir Bickov and Krezyiu downloaded a trial version of Aqua Connect’s Terminal Server software, reverse engineered it in violation of the End User License Agreement, and reused the code in Code Rebel’s iRAPP Terminal Server.

Aqua Connect’s lawyers unfairly used CherryOS as to booster their complaints. Their claims were by the U. S. District Court for the Central District of California in November of 2011.

It’s worth noting that Code Rebel was also reviewed by Mbloom’s LP committee for a potential investment opportunity, but the LP committee declined  to invest.

Vladimir Bickov, a defendant in the Aqua Connect case, is an employee of Code Rebel and, according to , worked on the video streaming capabilities of Ozolio.

“That whole lawsuit that happened between Aqua Connect and Code Rebel — guess what? They used CherryOS as the angle,” Kryeziu said.

“Not guilty. No evidence of us doing anything wrong,” . “Not only that, but after doing discovery on our side, we found that Aqua Connect had been stealing our ���Ǵڳٷɲ�����.”

Bicanic: The Unsung Californian?

With all of the controversy surrounding Kryeziu, the tech community seems to have forgtton that Mbloom is, in fact, a venture fund consisting of two cofounders. And Nick Bicanic, Kryeziu’s other half, is an impressive entrepreneur.

Bicanic has a successful exit in Purpose Wireless, a company he started with Remy Kozak in 2008. He has connections with some of the most influential funds in Silicon Valley, including Google Ventures and Sequoia Capital.

Bicanic also produced the feature-length documentary , which received high critical praise and a number of awards.

The only rub? Bicanic lives in California, not Hawaii.

Mbloom, as a team of two, has showed substantial promise and progress.

Mbloom’s initial goal is to incite quick traction in Hawaii, which Kryeziu and Bicanic believe can be accomplished with their investments in Flikdate and Ozolio.

, Ozolio is already in merger talks with a high-profile company in New York. A merger would be an undeniable boon to HSDC and to the tech community in Hawaii.

Similarly, that Flikdate, which recently reverse-merged with publicly traded company Crossbox, Inc, is gearing up to raise significantly more capital as a result of its newfound public status.

“We can’t always wait seven years to see a return,” Fooks said. If the stars align, Ozolio and Flikdate could prove that Hawaii Tech has merit, without a decade-long wait.

Where Do We Go From Here?

As evidenced at the town hall, the community is struggling to tow the line between vigilance and support.

“I’m wondering … are your LPs really interested in writing you another check right now?” the Mbloom founders. Farnsworth is the Managing Director of both Blue Startups and the Hawaii Angels.

“If we treat our investors that come from outside like this it’s going to be very difficult to convince them to invest in the state,” Farnsworth said.

Given the young age of the tech scene in Hawaii, it’s fair for community members to ask tough questions and to ensure that tech leaders represent Hawaii well, but it’s also important that our vigilance doesn’t unnecessarily stifle healthy opportunities for growth.

Whether Flikdate and Ozolio prove to be successful investments that catalyze that growth — the opportunities seem promising, but only time will tell.