An investor can sue an employee for damages, but whether the investor would be successful would depend on the facts. There would have to be some unique set of circumstances for the investor to prevail. If the company was properly formed an properly operated I find it unlikely the investor would be awarded any compensation from the employee, unless the payments to the employee were clearly improper or even fraudulant. You did not mention what the payments were for, if they were for wages you should be in good shape. Unfortunately, you will have to properly defend yourself if you are named in the suit. Perhaps the company will foot the attorney fees. Since employee was not involved until after the discovery of the payments, it does not appear that it would be frivolous or harrassment.