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Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

seattletimes.com

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Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#21

Post by Animats »

dboreham wrote: post #18
Animats wrote: post #16

Earlier quoted context omitted.

He was the chief financial officer. His job was to decide where to keep cash. So he would have that authority.

Disagree. Actually disagree twice. The company had approved a treasury policy (apparently written by the CFO) that said cash had to be in t-bills or similar (therefore not unbacked stablecoin). But the policy is orthogonal to access control to the cash. You can have a CFO who decides where to put cash, but still require two officers to approve any transfer > $1M (for example). This neatly takes care of the problem wh…

Small startups often don't have enough of a finance staff for proper separation of functions. That's the problem. Who in the transaction path had the authority to stop this guy without being fired? Probably nobody.

Here's the company.[1] It sells a "headless commerce platform".

[1] https://fabric.inc/

Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#22

Post by cldellow »

Animats wrote: post #16
dboreham wrote: post #12

To save time reading the content-free article, the indictment itself says: He personally, and without approval, transferred $35M of company funds to a second company he owned jointly with another person. He then invested that money in UST, which subsequently crashed. So in addition to "don't put all your money in SVB", start ups need to add : "don't setup signing authority on your bank accounts such that one person c…

He was the chief financial officer. His job was to decide where to keep cash. So he would have that authority.

The argument is that he didn't (a) disclose what he was doing, nor (b) disclose that he owned the company where the money went.

I work at a very, very small startup. Even our very small startup has by-laws that cover this:

> An officer who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or transaction or proposed material contract or transaction with the Corporation shall disclose in writing to the Corporation, or request to have entered in the minutes of the meeting of Directors, the nature and extent of such person’s interest at the time and in the manner provided by the Act. Such a person may participate in any discussion related thereto but shall not vote on any resolution to approve the same except as provided by the Act.

I suspect this is pretty boiler plate stuff. The family corporation that my wife and I own doesn't have this text in its by-laws...but that's because it's a closely-held company. I'd certainly hope that a "real" VC-funded company would have this text.

Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#24

Post by quantified »

AdrianB1 wrote: post #14
quantified wrote: post #4

Earlier quoted context omitted.

Rob someone of $1000 at gunpoint, get 10 years of hard time, rob many people of $50MM with a pen, get 2 years at a minimum security facility. Rob the American people of $10b, walk free. See the 2008 meltdown for details. Only the most egregious frauds (Madoff, Skilling) result in any serious time.

Unrecovered money should be converted to extra years in prison at a rate of the average salary in the country. That would be a few hundred years of prison, right? Good enough deterrence for people to do bad things with money.

Minimum wage is a clear standard.

Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#25

Post by [deleted] »

JumpCrisscross wrote: post #20
karaterobot wrote: post #11

Earlier quoted context omitted.

Because the facts have not been settled in court, and that's the word you use until you know the correct one.

> that's the word you use until you know the correct one "Accused of" and "allegedly" do this adequately. We don't know if this is embezzlement or if the firm's financial controls were so loose the CFO could plausibly and single-handedly "divert" cash like this. The title is generous, not incorrect.

[deleted]

Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#26

Post by iudqnolq »

karaterobot wrote: post #11
stcroixx wrote: post #7

Diverted? Took employers money without permission? Why won’t they just use the word we have that describes this?!

Because the facts have not been settled in court, and that's the word you use until you know the correct one.

If we don't know whether someone stole money the appropriate thing to do is say exactly that. Not make up something else and say that's what they might have done.

Re: Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash

#27

Post by ashwagary »

boeingUH60 wrote: post #15
vkou wrote: post #10

Earlier quoted context omitted.

I will eat my shoe if the median first-time white collar offender who only stole 35M gets 80 years. Elizabeth Holmes just spent two years delaying her prison date, and she (and her co-conspirator) will only serve a decade for stealing ten times as much.

> Elizabeth Holmes just spent two years delaying her prison date, and she (and her co-conspirator) will only serve a decade for stealing ten times as much. They didn't steal. They raised money from investors based on lies and squandered it. Of course, some of the cash made it back into their pockets, but it's not like they pocketed the whole $900m they raised based on their falsehoods.

>They raised money from investors based on lies and squandered it

Taking money under false pretenses is stealing.

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