Social photos and videos app Color will shut down at the end of this year, with Apple picking up some of its “key assets” and one of its founding employees suing the company and CEO Bill Nguyen.

The closure was confirmed yesterday on Color’s website: “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.”

This followed a day of revelations about the ill-fated company. Founding staffer Adam Witherspoon sued Color and Nguyen alleging a host of malpractices: unsafe work conditions, wrongful retaliation for reporting illegal conduct, unfair business practices and “intentional infliction of emotional distress”.

The suit refers explicitly to a time “when the company failed and key assets were being sold to Apple”, with TechCrunch following up with the claim that Apple paid £7m for these assets.

It’s an ignominous end for a startup that famously raised $41m of funding before releasing its first app. There may be more twists to come in the lawsuit, of course, while the technology may live on in future versions of Apple’s iOS software.