Square COO Keith Rabois resigned due to sexual harassment allegations

Keith Rabois, the COO of mobile payments startup Square, resigned Thursday for reasons that were unclear. On Friday, the Wall Street Journal (s NWS) was the first to report that Rabois resigned “amid accusations from a Square employee of sexual harassment.”

Square confirmed the report, saying in a statement:

The first we heard of any of these allegations was when we received the threat of a lawsuit two weeks ago. We took these allegations very seriously and we immediately launched a full investigation to ascertain the facts. While we have not found evidence to support any claims, Keith exercised poor judgment that ultimately undermined his ability to remain an effective leader at Square. We accepted his resignation.

In a post on his personal blog on Friday, Rabois wrote:

In May 2010, I met someone via mutual friends. With increasing frequency, we hung out, drank wine, and I helped prepare him for interviews with tech startups. As our friendship deepened, we spent more time together, and our relationship became physical. … Several months after our relationship began, I recommended that he interview at Square. He went through the interview process and was ultimately hired. I had no impact on his potential success at the company. At no point did he ever report directly to me, and I have seen his work product less than a handful of times.

Rabois denied the allegations:

I realize that continuing any physical relationship after he began working at Square was poor judgment on my part. But let me be unequivocal with the facts: (1) The relationship was welcome. (2) Square did not know of the relationship before a lawsuit was threatened; it came as a complete surprise to the company. (3) He never received nor was denied any reward or benefits based on our relationship. And (4), I did not do the horrendous things I am told I may be accused of. While I have certainly made mistakes, this threat feels like a shakedown, and I will defend myself to the full extent of the law.

He said he “decided to resign from Square so my colleagues could continue to do great work without the distraction that a lawsuit would most certainly bring.”

Square appeared ready to back Rabois in the suit. Richard Curiale, outside counsel for Square and Rabois, told AllThingsD, “I have not as yet found any conduct that is illegal and therefore there is no adverse relationship between Keith and Square. We don’t pay for claims that have no merit to them, because it amounts to extortion.”

Square, a Silicon Valley-based startup that allows vendors to accept credit card payments from mobile phones, was cofounded by Twitter cofounder Jack Dorsey in 2009. The company has raised over $340 million in funding, with a reported valuation of $3.25 billion.

This story was continuously updated Friday afternoon as information became available.