In a dramatic twist to the story of Color Labs, ex-employee and founder Adam Witherspoon has sued the company and its boss Bill Nguyen, complaining that he was the victim of "an extremely hostile, unsafe, and harassing atmosphere" that included "bringing an armed crony into the workplace to threaten and intimidate employees." In October, the company was the subject of a number of rumors, including its imminent shutdown, and an acquisition by Apple — a deal allegedly worth tens of millions of dollars. The lawsuit confirms that "the company failed" and that "key assets" have been sold to Apple.

Witherspoon says in the complaint that Nguyen "routinely humiliated, harassed, ridiculed, exploited, and punished employees," and that he threatened violence against his son on several occasions. Details in the suit suggest that Witherspoon and Nguyen had a close relationship, and that their families spent a significant amount of personal time together — including a vacation in which Witherspoon allegedly discovered Nguyen kicking his son in the stomach as a punishment. From there, the suit says their relationship continued to deteriorate as Nguyen's behavior became more bizarre and hostile, and Witherspoon accuses Nguyen of using his position of power "to publicly ostracize and humiliate" him and his family.

The lawsuit also alleges that Nguyen, enabled by Color's board, threatened and intimidated other employees who were cooperating in an investigation into the co-founder's "financial and other improprieties." The suit alleges that Nguyen then retaliated against Witherspoon when the company failed and was being sold by blocking his opportunities at Apple and offering him a "nominal" severance package. The suit alleges that Color's board knew that Witherspoon's severance was retaliatory, and that it condoned Nguyen's behavior by doing nothing.

The shocking nature of the suit can't be good news for Color or its new owner Apple, but this complaint just marks the start of proceedings — the allegations, naturally, will have to be tested in court or in settlement talks. We have asked Color and Apple to comment on the case.

Update: as noticed by Business Insider, Color has announced that it will close down its app at the end of this year. A message at the top of its website reads "Alert: We hope you've enjoyed sharing your stories via real-time video. Regretfully, the app will no longer be available after 12/31/2012."