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

cnn.com

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

#161

Post by Esophagus4 »

rozap wrote: post #132
firefoxd wrote: post #24

At an investor event, a desperate journalist was running around the room asking people their age. He ended up at our table, with a drink in hand, and a defeated look on his face. He had given up. We talked a bit, and he asked me, "are you under 30?" I answered "No. But this guy is." I pointed at the 28 year old cofounder of the start up I was part off. Before the evening was over, my colleague made it to the list of…

The forbes 30 under 30 to prison pipeline needs to be studied.

I'm thinking a "Wharton Prison 30 Under 30" Venn diagram would have a decent sized center.

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

#162

Post by MangoToupe »

jlarocco wrote: post #14
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…

The article says the judge called them out for not doing enough due dilligence. The fact that they didn't do enough research doesn't mean it's okay to scam them, though.

> The fact that they didn't do enough research doesn't mean it's okay to scam them, though.

It is absolutely, 100% morally OK to scam investment bankers. It's just not legal.

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

#163

Post by brandall10 »

hobs wrote: post #158
brandall10 wrote: post #150

Earlier quoted context omitted.

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.

For this deal, sure. What about others? Many times your competitors will come out ahead.

Risky decisions happen all the time in business, as long as the risk is outweighed by the perceived reward.

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

#164

Post by qingcharles »

wat10000 wrote: post #145
masfuerte wrote: post #115

Earlier quoted context omitted.

It seems like the effect of these college requirements is to teach ambitious young Americans that the way to get ahead is to cheat.

It's a valuable lesson.

They need to spend more time on the "not getting caught" chapter, I guess.

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

#165

Post by qingcharles »

wkoszek wrote: post #46

It's interesting how nobody talks about due-diligence being completely broken. We raised $$$ from many VCs and the DD for some of them was crazy: line item by line item with calls to customers etc. Tech folks were on phone with me and had to explain them stuff step by step, revealing a lot of confidential recipes. Also did this for bigger customers. And the $175M deal.. isn't there an earnout? Like $10M cash now, 1/4…

I think there is so many factors involved. I've been in ones where they are cutting the check before the elevator pitch has finished. If the founders are rock stars with prior receipts, then that DD goes out of the window. Especially if there is likely to be a ton of competition.

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

#166

Post by sally_glance »

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.

Maybe JP did actually smell something during DD but decided to go ahead because of FOMO and confidence that they could just sue later if their concerns turned out to be true...

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

#167

Post by qingcharles »

SapporoChris wrote: post #157
tptacek wrote: post #125

Earlier quoted context omitted.

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,”

I don't know how they run that in federal prisons, but in some states they'll just put that balance on your commissary account, so you'd go to buy some noodles and you'd be -$300m before you start.

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

#168

Post by jacquesm »

tverbeure wrote: post #75
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…

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…

I did DD on that for another group of investors and caused them to walk away. Interestingly, they too were scammers but of a completely different level.

I think the 'inventor' (loose use of the term, nothing really got invented) was a true believer, he basically thought that if only he could get his hands on some capital that he would be able to make it work. He simply did not have the background required to see that it could never work in the way that he proposed. Nicely faked demo though :)

I would do a write-up if I didn't think the case was more of a sad one than of someone trying to rip off investors, Jan Sloot just wasn't that kind of guy from my interaction with him. Maybe he did invent something: "Fake it before you make it".

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

#169

Post by jacquesm »

lumost wrote: post #148
cheema33 wrote: post #136

Earlier quoted context omitted.

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…

Was the scam that the codec had the raw video in it, so the "files" could be made trivially small?

The one I looked at had a little video receiver in the box. You can draw your own conclusions from there.

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

#170

Post by ozim »

paxys wrote: post #130
saalweachter wrote: post #126

Earlier quoted context omitted.

Limo services are also regulated by the TLC in NYC. The rules are different between taxis and black cars, but there are still rules.

Uber drivers need a TLC license in NYC and fall under the same regulations.

Was this true from the very start of Uber in NYC?
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