Legal Question in Business Law in California

You haven't provided enough facts and the claim that the CEO "grossly misused funds" could mean just about anything. Making bad or negligent business decisions is quite differently from embezzling, but your post doesn't indicate what really happened.

The CEO could have criminal liability, but it depends on what he or she did. For instance, there is no liability for poor business decisions, or even reckless mismanagement. There would be liability for embezzlement, however, and possibly for securities fraud (though prosecution of the latter is relatively rare).

Fortunately, you do not need criminal liability to establish a right to recovery. If the amount of money warrants the investment, moreover, you should probably retain counsel to help you prosecute the claim. Pro bono plaintiffs and large claims are often an unhappy mix, especially when the defendant has an attorney.

That depends on what he did. Your opinion that he "grossly misused funds" does not give us enough information.

As Mr. Perry notes, whether you have a right to recovery does not depend on whether the CEO committed a crime. But in case you were planning to threaten the CEO with criminal prosecution unless he pays up, you should know that such threats often qualify as extortion -- a serious crime in its own right. You could be prosecuted for doing that, whether the CEO has committed a crime or not and whether he is prosecuted or not.

You may want to consult with an attorney about your options before you proceed. Once he has the relevant facts, he will be able to advise you.

Good luck.