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Japanese Moon Startup Faces Discrimination Lawsuits

Tereza Pultarova
Maya Braunstein
February 6, 202410:00 PM UTC (UTC +0)

Two lawsuits have been filed against Japanese moon exploration start-up ispace.

Together they suggest the Tokyo-based firm, which saw its Hakuto-R lander crash during a debut lunar landing attempt in April last year, suffers from a toxic culture rife with discrimination and harassment against non-Japanese workers. 

The lawsuits, filed by the former CEO of ispace’s U.S. branch Kyle Acierno, and one-time Vice President of Spacecraft Development Mohamed Ragab, have both been filed in 2023 and are still waiting to be tried by the Colorado District Court in the U.S. 

Both Acierno and Ragab worked for ispace as the company transitioned from a tiny team of enthusiasts to an operation employing more than 200 staff on three continents. Their respective roles with the firm, however, ended in disappointment as the firm’s Japanese management allegedly treated them with disrespect and dishonesty, the lawsuits claim.

Moon Dreams

ispace began its life in 2010 as a parent company of Team Hakuto, a competitor in the Google-sponsored Lunar X Prize competition, which challenged privately funded teams to develop lunar landers and rovers that would be able to traverse 500 meters of the lunar surface and beam images to Earth.

Named after the mythical white rabbit that according to Asian lore lives on the Moon, team Hakuto, led by engineers from Tohoku University in Japan, was among five finalists of the contest, which offered a grand prize of $20 million to the first team to complete the task. 

The competition ended in 2018 without a winner, but several of the companies behind the top teams went on to raise sufficient funds to keep their Moon dreams going. ispace secured its future beyond the X Prize in December 2017 when it received a record-breaking investment of more than $90 million mostly from Japanese backers including the Innovation Network Corporation of Japan, the Development Bank of Japan, Tokyo Broadcasting System, Konica Minolta, and Suzuki Motors. 

Acierno first joined the company in 2016 as a young space exploration enthusiast. At that time, ispace had a permanent staff of only four people and operated with “limited financial means,” the lawsuit filed by Acierno’s lawyers on June 8, 2023, states. Acierno first worked at the company’s base in Tokyo for several months as an unpaid intern. Soon, the firm’s CEO Takeshi Hakamada offered him the role of Global Development Manager, hoping the Canadian would help the start-up build relationships with governments and bigger companies in the West. 

Within Acierno’s first year at ispace, his effort brought in a big contract with the government of Luxembourg, which led to the establishment of ispace’s European office where Acierno became the Managing Director. Two years later, he was promoted to Vice President of Global Sales and Strategy back at the Tokyo headquarters. In 2020, he was appointed CEO of the newly established U.S. branch. By that time, major cracks were evident in his relationships with the Japanese executives.

Ragab, unlike Acierno, was already a senior space industry professional with previous experience as a Chief Engineer at United Launch Alliance and Lockheed Martin. He was offered the role of ispace’s Lander Program Manager/Chief Engineer in 2016 and, just like Acierno, soon proved his worth, his lawsuit, filed in July 2023, states.

Ragab’s connections helped ispace forge a partnership with Draper Laboratory, a U.S. research organization that had developed the legendary guidance computer that navigated NASA’s Apollo-era landers to the lunar surface. 

The partnership with Draper later allowed ispace to bid for NASA’s Commercial Lunar Payload Services (CLPS) program and be selected as a future provider of lunar cargo transportation. 

Unity Gone Wrong

From the outside, things seemed to run smoothly at ispace in those years. Behind the scenes, however, tension brewed between the company's Japanese and non-Japanese workforce, the lawsuits claim.

Although headquartered in Japan and headed by a Japanese CEO, ispace has been employing international professionals from the start. Most of the engineers working on the lunar lander had other than Japanese nationality, Acierno’s lawsuit claims. The atmosphere, however, was not an “all-for-one, one-for-all” multicultural space utopia; a unifying endeavor bringing people from all continents and walks of life. Quite on the contrary. 

“Japanese engineers refused to take orders from non-Japanese team leads,” Acierno’s lawsuit states. “Such insubordinate behavior disrupted the normal workload and introduced delays in the project.”

Ragab, leading the engineering work, bore the brunt of the animosities that appeared motivated by nationalistic sentiments. 

“Japanese members of the software team on the project, led by Japanese employees Yuuya Sugaita and Fumiaki Yamana, refused to attend most meetings, including critical reviews, and report any progress for the year to Mr. Ragab,” Acierno’s lawsuit states. “These members, as well as Electric Manager, Ryo Ujiie, constantly undermined Mr. Ragab. This was tolerated by CEO Hakamada.”

The lawsuits also describe a 130-page thread of Slack chat messages exchanged by high-ranking Japanese employees plotting against their non-Japanese colleagues and planning to orchestrate their dismissal through false accusations. The conversation leaked to 20 other staff members in April 2019, resulted in a major downturn in relationships within the company.

Unpaid Stock Options

Ragab’s tenure at ispace was, at that time, coming to an end. His lawsuit details a campaign by ispace’s CEO Takeshi Hakamada to persuade Ragab to leave voluntarily and relinquish his stock options worth 2.5 % of the company’s value, based on the terms of his employment contract signed in 2016.

“Defendant Hakamada told Plaintiff to remember that if he keeps that ‘attitude not to try to agree, and then try to keep staying’ ... ‘psychologically, it’s not good for’ Plaintiff,” the lawsuit states.

“Defendant Hakamada warned that if Plaintiff continues his employment with Defendant ispace, ‘similar things (such) as the Slack will happen again, and then more, much worse next time,’ and that ‘next option will be more proactive actions in a bad way.’”

Ragab was eventually fired in February 2020 for a supposed “lack of achievement.” His lawsuit claims he had been “subjected to unwelcome comments, jokes and slurs based on his national origin” throughout his employment with ispace. He has also never received his stock options, worth $8 million in ispace’s IPO in April 2023, which took place only two weeks before the failed landing of the Hakuto-R mission. 

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At that time, Acierno, too, was no longer with the company. He was dismissed in August 2022, only a few weeks after the partnership with Draper won a $73 million CLPS contract to deliver cargo to the moon’s far side for NASA. Just like Ragab, Acierno, too, was denied the stock options assigned to him in his employment contract.

“CEO Hakamada denied his request and verbally threatened him by saying that if Mr. Acierno tried to exercise his stock, ‘[He] will have [a] lot of enemies!’” states the lawsuit. 

ispace declined to comment to Supercluster but pointed to two documents (here and here) addressed to the Tokyo Stock Exchange in December 2023, in which the firm discloses that a case related to one of the two American lawsuits was dismissed by the Tokyo High Court that month.

Botched Landing

In an article published on Sept. 23, 2023, Financial Times links the toxic culture within the company with the failed Hakuto-R landing on April 26 last year. According to the newspaper, “the turnover of engineers at ispace was so high” in the years leading up to the landing attempt “that entire teams sometimes left at once.” The article, based on interviews with “dozens of former and current employees” describes ispace’s corporate environment as one where “failure was not allowed” and where “technology concerns were allegedly pushed aside.”

The landing failed when the probe’s altitude sensors got confused by a crater rim, indicating the lander was already nearing the ground. According to Ragab’s lawsuit, the failure occurred due to a late decision to go for a different landing site, for which the project team didn’t run simulations. 

The landing failure did not slow down ispace. Its Mission 2 lander is currently being assembled in Japan and could be launched at the end of this year, the company said in an earlier statement. That mission, if successful, will place a series of experiments and a 26-cm-tall rover on the surface of the moon to study local resources. 

The NASA-funded Mission 3 is currently expected to take place in 2026. The company is developing a new-generation lander that will be able to deliver to the moon’s surface 300kg worth of payload, which is ten times more than the first-generation spacecraft. In December, the company announced it had received an $80 million grant from the Japanese government’s Small Business Innovation Research (SBIR) program to fund the development of its third-generation lander that could fly to the moon toward the end of this decade. 

Tereza Pultarova
Maya Braunstein
February 6, 202410:00 PM UTC (UTC +0)