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Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

businessinsider.com

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Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#101

Post by fatnoah »

rqtwteye wrote: post #86
loandbehold wrote: post #47

Earlier quoted context omitted.

Javice interfered in due diligence in a very sophisticated way. JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". In the end Javice was able to convince due diligence team by engaging in multiple layers of fraud. Sure due diligence team could've done a better job, but Javice was a sophisticated adversary. It's not like due diligence team didn'…

“ Javice claimed they couldn't provide user personal information "due to privacy concerns”” That’s pretty much what Theranos did. The due diligence people walked away and threw a few hundred million more at Theranos. That’s compares to the due diligence we went through when I worked at a small startup years ago. It was only for a few million but they made us go through hell with all their information request. Seems i…

> That’s compares to the due diligence we went through when I worked at a small startup years ago. It was only for a few million but they made us go through hell with all their information request.

I went through this as an exec at a startup for a deal in the "few 10's of millions" range and the level of effort for the due diligence process was astounding. I'm pretty sure that by the end of the process, the acquiring company knew more about us than we did ourselves.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#102

Post by koolba »

tommek4077 wrote: post #38
gruez wrote: post #27

Earlier quoted context omitted.

> $175M could have easily paid for a bunch of domains to run MX servers. You don’t even have to keep the email. Just accept it and send it to /dev/null. You don't think it would be at all suspicious that most of the emails in the customer list are using weird custom domains rather than the popular ones like gmail.com or outlook.com?

Just create a big email provider with that kind of money. You might even get a legimate business out of this ;)

Could even end up like that movie plot where the bank robbers setup a bake shop next door to drill into the vault, but the front ends up being profitable.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#103

Post by deltarholamda »

jononomo wrote: post #84
mbesto wrote: post #55

Earlier quoted context omitted.

> JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". DD guy here. This is the most plausible explanation. When you're under LOI there is a lot of back and forth, which ultimately guide how the purchase agreement gets formulated. So if this was the case, then they would have made the trade off of "ok she's not letting us see the list, but we'll…

What is a DD guy? and what does LOI stand for?

Due Diligence, and Letter Of Intent.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#104

Post by landemva »

mostlystatic wrote: post #24
bamazizi wrote: post #11

Really surprised at lack duedeligenoe on the part of acquirers, JPM team!!! My immediate reaction to when JPM found out they'd be duped after running an 'email campaign' was, hmmm, maybe well deserved, should have done your homework! I want to put the blame solely on the executives, lawyers and team that drove the acquisition forward. Obviously we can open the floodgates of conspiracy theories. Maybe, some from JPM t…

I wondered about that when reading the Money Stuff article about it a while ago. What should they actually have done differently? One of the issues was that "she could not share her customer list due to privacy concerns". So maybe JPM could have pushed back against that more? """Javice also cited privacy concerns in sharing Frank’s customer data directly with JPMC. After numerous internal conversations, and in order…

> What should they actually have done differently?

Credit card processor revenue reports over prior months may have shown startingly small revenue. Match that with bank statements.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#105

Post by galacticaactual »

oh_sigh wrote: post #26
josephd79 wrote: post #16

When are people going to learn you can't "fake it until you make it" anymore. "Allegedly" She's going to go to jail now.

People really need to learn if you get a huge pay day via fraud, then take your cash and head over to a country on rocky diplomatic terms with the US and no extradition treaty, and be generous with your hosts.

People really need to learn to not do fraud.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#106

Post by duxup »

tommek4077 wrote: post #38
gruez wrote: post #27

Earlier quoted context omitted.

> $175M could have easily paid for a bunch of domains to run MX servers. You don’t even have to keep the email. Just accept it and send it to /dev/null. You don't think it would be at all suspicious that most of the emails in the customer list are using weird custom domains rather than the popular ones like gmail.com or outlook.com?

Just create a big email provider with that kind of money. You might even get a legimate business out of this ;)

That seems like a better choice than crime.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#107

Post by caminante »

altacc wrote: post #51
jjgoldman wrote: post #13

Sounds very clearly that JPMC was defrauded, and at the same time did a very poor job of due diligence in a 9 figure acquisition. How did a financial audit not uncover the dramatic mismatch in actual vs. purported activity? How does a transaction value of $41 per user (x 4.25M users) not translate to an auditable revenue stream? This doesn't look good on either party.

I listened to a documentary about the Crazy Eddie electronic chain, which was fraudulent to the core but passed audits. The ex-CFO made an interesting comment: when large accounting firms do an audit, they're checking what the business has recorded on its accounts adds up, they're not checking if the reality behind the accounts are correct. As long as your books balance, you look healthy.

Yeah, audit can mean many things and the scope matters.

Typically, it's just compliance.

Diligence usually means talking to top customers, but deals get rushed, access is a negotiation point, and liars are hard to detect.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#108

Post by PeterisP »

cldellow wrote: post #70
chadash wrote: post #59

Earlier quoted context omitted.

A 9-figure acquisition sounds like a lot, but consider that this is less than 0.05% of JP Morgan's market cap. Their market cap is down $6 billion today, and it's not even a particularly notable day. And it's not like that money is completely gone. JPM will sue and probably recover a very large chunk of it. Say that of the $175 million, they get back $150M, so they are out $25M. It's just not that much money to them.…

> JPM will sue and probably recover a very large chunk of it Who are they going to sue? Javice's stake in the company was only worth $21M. If the rest is held by shareholders who weren't involved in the running of the company, good luck getting it back from them.

It seems quite plausible that most of the money paid for the company was placed in escrow for some time, exactly to cover scenarios like this where the seller misrepresents something material about the company.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#109

Post by telotortium »

fn-mote wrote: post #19

How much due diligence really occurred here? I have no problem with charges being filed, but seriously... it's not like the buyer was some kind of low-budget mom and pop shop or community bank. I'm just not very sympathetic to JPMorgan for being scammed in a situation where being wary should be standard.

Eh, optimal amount of fraud is not zero - they as a bank should know that better than anyone - and they are going back to sue and press charges against the fraudulent founder. If JP Morgan Chase is being defrauded all the time, it's a different matter, but there's no indication of that here - they're not Credit Suisse.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#110

Post by fisherjeff »

helsinkiandrew wrote: post #90
toss1 wrote: post #63

Earlier quoted context omitted.

You need to do more than "peek at" the real data, at least if you are buying a business for actual revenue and not for it's potential as an idea. You need to follow at least some threads all the way down to the ground truth. First, ask for 20 references of successful happy customers, talk to all of them, and do some verification. Then demand to see all the "real" data and select a random sample of 50 emails and track…

> Then demand to see all the "real" data and select a random sample of 50 emails and track them all down to real people (or not), and ask the people at those endpoints what is going on Apart from the privacy/compliance/legal reasons that make this very difficult. A very low proportion of 50 real paying corporate customers are likely to respond to an email from a seemingly random source, change that to 50 students you…

Not to mention, if you really did have a mailing list that was effectively worth $175m, why would you give the whole thing to anybody before you get paid?
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