Zenefits CEO Parker Conrad has been booted, and COO David Sacks takes the reigns, reports Bloomberg.
Conrad is off the board of Zenefits, which offers HR tools, and Peter Thiel has joined the board.
The shakeup comes after BuzzFeed uncovered in November 2015 the $4.5 billion startup allowed salespeople to act as insurance brokers in at least seven states despite lacking the licenses to do so.
On Friday, in a followup report, BuzzFeed reported that 83 percent of Zenefits' insurance deals in Washington state through August 2015 were done by employees without necessary licenses.
Zenefits claim to fame is "software as a service", with a particular focus on helping employers manage health insurance coverage for employees.
Sacks confirmed the news in an email to employees on Monday and addressed concerns going forward.
"In order for us to move forward as a company, we cannot seek to hide or downplay the problem," Sacks wrote. "We must admit it and remediate it as soon as possible. In December, we hired a Big Four auditing firm to conduct an independent third-party review of our licensing procedures that we will turn over to regulators as soon as possible.
"I will expand that effort into a top-to-bottom review to ensure appropriate and best-in-class corporate governance, compliance and accountability."