Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

forbes.com

Post reply on HN
Print view View original

131–140 of 166 posts

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#131

Post by yesbabyyes »

alchemism wrote: post #35
jedberg wrote: post #28

> It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself I don't find that ironic at all. Having worked in the security space for a long time, it seems like the best people in the business are the ones who would be great at committing the crimes if not for their own morality. Someone with a weak sense of morals could easily turn to evil.

One of Terry Pratchett's Discworld novels features a thief being deliberately put in charge of the Royal Mint. https://en.wikipedia.org/wiki/Making_Money

A few years ago, it was discovered that the head of the Royal Coin Cabinet of Sweden, a museum with one of the world's largest coin collections worth almost $3 billion USD, had been stealing and selling historical coins worth a fortune. Kind of the opposite, really.

There's a three part documentary series here (Swedish): https://www.svtplay.se/guldfeber-stolderna-pa-kungliga-myntk...

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#132

Post by Retric »

ghaff wrote: post #126
dmurray wrote: post #119

Earlier quoted context omitted.

The idea is everyone must take vacation (sometimes X+ consecutive days each year), not just the people you suspect of running scams. Giving all of your employees two weeks unannounced vacation at random times is a disruptive way to run a company. It's certainly innovative but I wouldn't say it's HR "done right".

You have to take at least half you annual vacation starting tomorrow. Have fun! Yeah. That doesn't work. Forcing the same thing in a scheduled way may be a bit of an imposition but isn't unreasonable in general.

Doing so in an unscheduled way is beneficial for similar reasons you want to test when services go down in controlled circumstances. https://en.wikipedia.org/wiki/Chaos_engineering

Large companies simply have different risks. If someone quitting randomly is a huge risk for your business you want to know about it ahead of time to mitigate it while they still work for you. 1 random week of vacation every ~3 years shouldn’t be a big deal, and discovering it was is valuable.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#133

Post by yesbabyyes »

elliekelly wrote: post #40
rococode wrote: post #15

Have VCs started skimping on DD because problems come up so rarely? Lightspeed (who led the last round for these guys) isn't a no-name firm, they invested in Snap, GrubHub, Telegram, etc. Surely they have the experience to find out gigantic major problems like this? This feels like something that should've come up in diligence before they sent them 120 million bucks... There are so many places it could've shown up or…

What’s absolutely stunning to me is the (former) CEO quote in the article says the company was under SEC investigation for fraud as early as November of last year. And given that the DOJ complaint alleges the fraud occurred between January 2019-February 2020 I would be inclined to believe it. (Fraud doesn’t tend to just stop of it’s own accord.) So was the investigation disclosed to Lightspeed and they decided to inv…

In this case the due diligence, while quite due, perhaps wasn't very diligent.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#134

Post by jlarocco »

billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

I was wondering the same thing. I can see 5 or 10% slipping under the radar, but 90%? What were these 200 employees even working on?

Engineering would be the most distant from customers, I guess, but even they must've noticed how few bugs were coming in.

Hard to believe it wasn't found out earlier.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#135

Post by jlarocco »

HappyDreamer wrote: post #127
hn_throwaway_21 wrote: post #71

Earlier quoted context omitted.

Bingo! I worked in the upper management team of an early stage startup where the CEO was lying through his teeth to investors as well as employees. There were only three people at the top level. He was a super charismatic guy and a great story teller. No one thought he was lying until it came time to raise the next round and the lead investor from seed round ran due diligence to find booked revenue was no where close…

> No one thought he was lying until ... I wonder what happened after that? Could he continue working as if nothing special, just failing to raise money?

I can't imagine that first seed investor wouldn't press charges and file a lawsuit.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#136

Post by PeterisP »

tdons wrote: post #88

An auditor was fooled while he was in the room watching while the ceo downloaded bank account statements (pages 10/11 of https://www.justice.gov/usao-sdny/press-release/file/1317641... ): d. As part of its due diligence process, the Audit Firm had an employee (the “Auditor”) conduct a physical site visit at NS8’s offices in Las Vegas, Nevada. The Auditor was directed by a more senior Audit Firm employee to have someo…

The whole concept of "have someone from NS8 log in to the online portal for each NS8 bank account, display the current account balance, and download monthly bank statements for fiscal year 2019." seems kind of weird and even ridiculous.

In the audits I've seen, the standard procedure to get the same information would require the company to authorise the auditors so that they could get a written confirmation of the funds directly from the bank or whoever holds the assets or debt. You would not trust the account statements that the company gives you, you would get the same (hopefully) account statements yourself. Accepting that watching a company employee log in some site is equivalent to getting an official confirmation from that outside third party is .... interesting. The whole point of an audit is to verify if everything that the company shows you is actually true instead of looking at what they show you and believing it.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#137

Post by nickphx »

pstoica wrote: post #8
joering2 wrote: post #5

Sounds like a witch hunt. Big corpo tries to get rid of competitor. And once again government destroyed someones life. Now that he cannot do his part anymore its so easy to proof he deceived investors because well he doesn’t have any numbers to show si yeah he was lying. And besides, who didn’t flex a slide or two to show future numbers how they hoped it will look instead of honest truth. If thats the case then DOJ h…

This is simply not the case. Adam lied to everyone's face for years. Read the documents and financial statements if you think this is just a little "flex" every couple of slides.

it doesn't surprise me. i worked with him over 20 years ago when he ran hiphopsite.com, he was a shifty guy then.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#138

Post by throwaway2332 »

pge wrote: post #94
billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

Where was the board during this whole time? I have trouble understanding how a board allows a management team to operate in such a way that controls aren't in place (eg basic segregation of duties in finance) that would prevent or at minimum reveal this kind of behavior. The board should be seeing enough information that most of the flags you highlight should be visible to them. Not to mention, clearly the company wa…

I’ve been in board meetings with top tier, very well known VC board members where the CFO basically showed them the CEO was lying to them. The next two meetings the finance guy wasn’t allowed to present and then he quit. The board members never looked into it. It was like they didn’t want to know.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#139

Post by duncan_bayne »

rapnie wrote: post #118
liability wrote: post #63

Earlier quoted context omitted.

Sometimes tribal/"team sport" group dynamics keep employees inline too. Executives can foster an "us against the world" mentality that blinds workers to that which is obvious to everybody else. When in this mindset, people have the ability to ignore even the most damning evidence. Here's an example: When Enron's CEO verbally attacked wall street analyst Richard Grubman for questioning Enron's accounting practices, En…

This is massively scalable. There are examples, but I do not want to get political.

Leaving aside the specific politics, this is one of many reasons I advocate for replacing voting with sortition (picking representatives from the electoral roll, in much the same way as juries are picked).
Post reply on HN