- where are the contracts corresponding to revenue? Yeah they are an SMB SaaS but this is financial, there will be contracts, NDAs, etc
SMB, especially the small end of SMB, does not often have contracts. It's more subscription based. That said, there were 2 versions of the software running at NS8. One was the original software that Adam Rogas and a co-founder created early on. That version was rather "opaque" and reported growing customer numbers every month. The newer version of the software was controlled by the product dev team but still reliant on the original software in some key areas. Basically, everything was obfuscated well enough to confuse everyone to the point where answers of, "it's a limitation of the original software" were taken at face value.
- if the customers are fake there is no load on the system. How does engineering not figure that out?
There were real customers and the customer growth was happening, especially in 2020. The problem is that the customer base and growth was nowhere near what Adam Rogas was cooking up on the backend.
- How does no one see an insanely low COGs when paying the cloud services bills, or the lack of allocated resources when looking in the management interfaces?
COGs and other bills were kept relatively high. It's also why the company hired 200+ people, to make the story all the more believable.
- How does no one notice a complete lack of analytics or actions being generated by all the supposed customers?
Again, real numbers were difficult to gather for excuses given repeatedly by Adam Rogas and others charged with providing those numbers. I'm not saying that others were complicit in the scam, but that they were (at least) being fed the same excuses the rest were. Investments were never made to bring visibility to the customer metrics. Was this a red flag? Yes, but then why are investors giving NS8 so much money? It's hindsight 20/20.
- Managing cash flow would be very hard. Finance is going to see all this revenue coming in and want to scale. The VCs are going to want to see money being spent on marketing activities etc. to further the growth. If there’s no corresponding revenue being spent to acquire customers but tons of revenue coming in that’s a giant red flag
Right, so plenty of money was being spent across the board. There were 2 bank accounts according to the DOJ and SEC complaints. The account for "customer revenue" was solely controlled by Adam Rogas. The other account held the investment funds that paid all the bills. Is this super shady? Yep. And it seems there was an NS8 whistleblower who kicked off the initial SEC investigation and then the FBI getting involved as well.