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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

#111

Post by [deleted] »

PeterisP wrote: post #108
cldellow wrote: post #70

Earlier quoted context omitted.

> 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.

[deleted]

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

#112

Post by oh_sigh »

galacticaactual wrote: post #105
oh_sigh wrote: post #26

Earlier quoted context omitted.

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.

Well, fraud has been happening for the entirety of recorded history, so that seems like a tough lesson to learn.

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

#113

Post by dd82 »

styren wrote: post #93
jononomo wrote: post #84

Earlier quoted context omitted.

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

They are both pretty household terms that you could've easily Google.

for you, maybe. but not me.

DD - disk destructor, double-down (a tire sidewall specification) SPA - single page application, specific purchase agreement, etc

and the list goes on.

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

#114

Post by disqard »

spartanliving4u wrote: post #95
A_D_E_P_T wrote: post #40

Earlier quoted context omitted.

For what it's worth, the Matt Levine article is here: https://archive.ph/j5JBq And it is a wild story! It's probably going to get the miniseries treatment. The Uber/Theranos/WeWork shows were pretty popular, after all, so I'd bet that a second batch is coming with FTX, Frank, and that Korean guy who went on the lam in Montenegro. Hah.

what Korean guy?

They're probably referring to Do Kwon's arrest in Montenegro:

https://www.bbc.com/news/technology-65058533

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

#115

Post by mbesto »

maxbond wrote: post #82
mbesto wrote: post #81

Earlier quoted context omitted.

> it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. No one made you buy crypto on FTX. You have to do your own diligence. > It seems like they've just priced it in Ding. Ding.

My mistake, I thought you were interested in a discussion about interesting topics, I see you're more interested in being patronizing on the internet. That's not really what I'm here for, so take care.

You made a bold and unfounded statement:

> it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded.

and I commented on why I thought it was wrong (e.g. "you don't have to deal with these externalities unless YOU choose to"). How is that not a discussion?

> That's not really what I'm here for, so take care.

Yet, you still responded...hence, discussion.

Sheesh, tough crowd.

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

#116

Post by mbesto »

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.

> 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.

Not necessarily true. Depending on the type of audit, part of the audit is to cherry pick (or randomly pick) recorded accounts and confirm whether they are backed up by various documents. For example - anyone can put in a receipt for a plane ticket and then have that plane ticket hit the P&L as a journal entry. But an auditor may look at the plan ticket receipt and check for the date, name of person on it, what date they were flying, what was their origin an destination, etc. etc.

Source - currently under audit, and auditors are asking for confirmed records that support what is in an accounting system.

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

#117

Post by [deleted] »

mbesto wrote: post #81
maxbond wrote: post #74

Earlier quoted context omitted.

When VCs skip diligence and invest in a bunch of frauds like Wirecard, Greensill, FTX, etc., it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. Since huge frauds propped up by VCs seem to collapse several times a year, it doesn't seem like losing their money is incentive not to invest in frauds. It seems like they've just priced it in. Granted, t…

> it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. No one made you buy crypto on FTX. You have to do your own diligence. > It seems like they've just priced it in Ding. Ding.

[deleted]

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

#118

Post by b59831 »

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.

I'll quote another comment: > 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't have any concerns. But they wanted to balance their concerns against possibility of passing a good deal due to formality.

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

#119

Post by dannylandau »

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.

what the documentary called and where can you stream it?

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

#120

Post by toss1 »

fisherjeff wrote: post #110
helsinkiandrew wrote: post #90

Earlier quoted context omitted.

> 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?

For sure, you do NOT give them the whole thing. You let a (presumably skilled) data analyst run a few queries. Letting out 100 or even 1000 names/profiles out of 4 million is effectively commercially worthless beyond verification.

Even if you don't get responses & interviews, you can also use the profiles to do verification - just find correlated data in the wild showing that these people exist -or don't. Check the physical addresses - is the same family name resident? Check school records, does the student exist? Etc. Etc. Etc. Sure, you'll find a few failures, but when they all turn uo bad, you will have saved your team $175 million - worth a weeks effort.

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