Vanguard Faces Fraud Claims for First-Ever Corporate Acquisition

Vanguard Group Inc. duped the founders of Just Invest—the indexing giant’s first-ever corporate acquisition—into accepting deferred deal payments it never planned to make, they said in a legal filing.

The three co-founders and other ex-shareholders are suing the mutual-fund behemoth in two courts over the transaction, which handed Vanguard control of Just Index and its Kaleidoscope platform for helping financial advisers build tailored portfolios. Their lawsuit made public Thursday added a misrepresentation count to earlier-filed fraud claims.

The 2021 deal—marking a controversial pivot for Vanguard—was part of a wave of similar purchases by major asset managers looking to expand ...