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Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

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Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#151

Post by TuringNYC »

Dylan16807 wrote: post #133
pessimizer wrote: post #111

Earlier quoted context omitted.

Whatsapp elaborately explained how it was doing this to the public, it was with a technology (Erlang/OTP) that had rarely been used before, and that technology had been designed for and very successful in an almost identically shaped context (telecom switches.) Also, more obviously, people you knew were using it every day. 450M is different than 4M, and way different than 300K. If Whatsapp were lying and saying they…

> Whatsapp elaborately explained how it was doing this to the public, it was with a technology (Erlang/OTP) that had rarely been used before, and that technology had been designed for and very successful in an almost identically shaped context (telecom switches.) Sure. But the point is, Whatsapp had 0.5 total employees per 4 million users, and Frank had 20 support employees per 4 million supposed users. Even if you t…

WhatsApp doesn’t need staff because they weren’t processing regulated financial transactions. Thr app operated in a best efforts basis since it was mostly free. You don’t need customer support staff for that — there is no support.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#152

Post by neilv »

cheema33 wrote: post #136
tverbeure wrote: post #75

Earlier quoted context omitted.

Back in the nineties, Philips was days away from signing a licensing deal for a revolutionary video compression technology that compressed whole movies down to 8KB. The former Philips CTO was a strong believer. And then the inventor died and nothing ever came of it. To be a fly on the wall during due diligence meetings between Philips engineers and management. https://lowendbox.com/blog/the-man-who-was-paid-e113000-f…

Video codec compression scams remained popular even in early 2000s. I worked for a very large public tech company. One of the top 10 in that era. And they fell hard for scammers from Las Vegas that promised revolutionary audio/video compression. We had to sign all sorts of NDA and couldn't look under the hood of what they delivered to us under penalty of breach of contract and all that stuff. I "accidentally" ended u…

> I reported the findings to my manager [...] the whole project got shut down and about 200 people working on project lost their jobs. Myself included.

Good for you for reporting the threat. But I'm a little surprised that they let the messenger get killed along with all the other innocents.

I knew someone who whistleblew to C-suite, about misrepresentations they realized, on something that was then an existential threat to one of the top companies in its market. A series of layoffs and (IIUC) some M&A later, most of the employees were gone, but that one middle-aged engineer who warned C-suite (averting an even worse fate for the company) escaped all the layoffs, and was still there.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#153

Post by TuringNYC »

gruez wrote: post #120
TuringNYC wrote: post #72

Earlier quoted context omitted.

You could also obfuscate all PII and just join the user table with the website clickstream table and notice that only 10% of the users had any associated clickstream.

Presumably JPM didn't have prod db access to run whatever queries they want, and had to ask for access. They also faked user tables. What makes you think they wouldn't have faked the user activity table as well?

Ok so sometimes when people come to me for an angel investment I ask to look at their Pendo/GA records. I mean you could fake those, but that’s a lot of work and possibly harder than actually getting the business in the first

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#154

Post by TuringNYC »

danielmarkbruce wrote: post #131
TuringNYC wrote: post #12

>> A prosecutor, Micah Fergenson, though, said JPMorgan “didn’t get a functioning business” in exchange for its investment. “They acquired a crime scene.” I do not understand how an acquisition this big got thru due diligence without noticing all the fake users. Anyone in corporate M&A know if it is normal to spend this much money without inspecting the goods? Seems like the most basic of OLAP queries and two days of…

You often don't get to "inspect the goods" at a user by user level. Put yourself in the shoes of a non-fraud company where the asset is your customer set. Do you let JPM go through line by line confirming each one? No, you do not. You give redacted data or aggregate data. In eyeballs/non-paying user businesses, this is just going to happen sometimes. In practice you don't get to do the diligence you want to do someti…

Doesn’t the Data Room solve this?

https://carta.com/learn/startups/equity-management/data-room...

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#155

Post by ajross »

tptacek wrote: post #122
ajross wrote: post #73

Earlier quoted context omitted.

Potato/potatoe. Existing taxi medallion holders were absolutely harmed by Uber. Existing licensed hotel operators were absolutely harmed by AirBnB. And we all celebrated that to great effect here. But it was breaking the rules. We just think THOSE rules were bad but THESE rules are good. Well, it's not our call to make, it's the prosecutors'. And you (yes, you personally) aren't nearly as insulated from this kind of…

No, your logic doesn't hold. The distinction being drawn here is between civil and criminal liability. Operating an unlicensed taxi service in most municipalities (maybe all of them) is a civil infraction, not a crime.

Sure, because it's not my logic!

The founder in the linked article thought that she was on the right side of the line. She wasn't. You personally might think you're too smart to[1] fall afoul of this kind of thing and that all your cheating[2] will be non-prosecutable.

But quite frankly most "criminally liable" misrepresentations to investors aren't prosecuted (basically none of them are), so the fact that this one was is more a statement about the influence of JP Morgan and the mind of this one prosecutor. And blanket statements that absolutely none of Uber's shenanigans were prosecutable seem laughable. Crimes abound.

The point wasn't to nitpick about crimes and penalties. It was that this crime happened in the context of a culture that structurally encouraged it, and we would all do well to recognize that instead of nitpicking fake reasons why it would never happen to us.

[1] The ironic analogy to hubris in security analysis isn't lost on me

[2] Because again in this world All Founders Cheat a Little Bit. We all know it.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#156

Post by tptacek »

ajross wrote: post #155
tptacek wrote: post #122

Earlier quoted context omitted.

No, your logic doesn't hold. The distinction being drawn here is between civil and criminal liability. Operating an unlicensed taxi service in most municipalities (maybe all of them) is a civil infraction, not a crime.

Sure, because it's not my logic! The founder in the linked article thought that she was on the right side of the line. She wasn't. You personally might think you're too smart to[1] fall afoul of this kind of thing and that all your cheating[2] will be non-prosecutable. But quite frankly most "criminally liable" misrepresentations to investors aren't prosecuted (basically none of them are), so the fact that this one w…

I agree that people shouldn't kid themselves about criminal liability, but not that criminal liability is routinely incurred by startups.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#157

Post by SapporoChris »

tptacek wrote: post #125
SapporoChris wrote: post #118

Is it correct that Charlie Javice is keeping the majority of the profits she made from the sale of Frank? If so, it's quite possible she considers the profit well worth the penalty.

No. She's required to make restitution far in excess of the total proceeds of the sale, including as a minor component a sum that captures her own personal proceeds.

Ah, thank you. I found the details here.

https://www.justice.gov/usao-sdny/pr/startup-ceo-charlie-jav...

“Javice perpetrated a $175 million fraud—repeatedly lying about the success of her startup company and even hiring a data scientist to create fake data to back up her lies. For that, Javice has been sentenced to 85 months’ imprisonment and ordered to pay over $300,000,000,”

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#158

Post by hobs »

brandall10 wrote: post #150
wat10000 wrote: post #137

Earlier quoted context omitted.

Funny how that has the exact same shape as a typical scam targeted at individuals. They usually rely on creating a sense of urgency and the sense that you could blow the whole thing if you aren't careful. A warrant scam will tell you that they need payment (in gift cards, of course) right now or you're going to jail, and likewise if you hang up or tell anyone what's going on (and thus might have someone tell you that…

Of course, but this is basic human psychology when power asymmetry is at play. Frank "held the cards" in this deal, so to speak, and was helmed by a CEO that demonstrated sociopathic tendencies willing to do whatever it took. You can of course hold to a particular standard, but if a competitor is willing to relax that standard, you lose a distinct advantage.

No you don't - they are now vulnerable to scams and you are not.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#159

Post by joshmn »

Former federal inmate here who was recently released from prison a month ago today (I did 18 months): The big deal here was the loss amount, which can be construed any number of ways whether we like it or not. This will jack up the points and tilt the scale for the sentencing guidelines, and believe me they are archaic.

After all is said and done, Charlie Javice will be hanging out at a prison camp—probably down there with Holmes and Maxwell, because it's cushy—and do no more than 4 years on the 7 assuming she completes all her programming requirements.

Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan

#160

Post by [deleted] »

cheema33 wrote: post #136
tverbeure wrote: post #75

Earlier quoted context omitted.

Back in the nineties, Philips was days away from signing a licensing deal for a revolutionary video compression technology that compressed whole movies down to 8KB. The former Philips CTO was a strong believer. And then the inventor died and nothing ever came of it. To be a fly on the wall during due diligence meetings between Philips engineers and management. https://lowendbox.com/blog/the-man-who-was-paid-e113000-f…

Video codec compression scams remained popular even in early 2000s. I worked for a very large public tech company. One of the top 10 in that era. And they fell hard for scammers from Las Vegas that promised revolutionary audio/video compression. We had to sign all sorts of NDA and couldn't look under the hood of what they delivered to us under penalty of breach of contract and all that stuff. I "accidentally" ended u…

[deleted]
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