Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

cnn.com

Post reply on HN
Print view View original

231–240 of 366 posts

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

#231

Post by dboreham »

Aurornis wrote: post #88
NickC25 wrote: post #78

Earlier quoted context omitted.

>From what I read she also invoked various privacy law excuses to give them the run-around while they were pressured to close the deal. And that should have been a massive red flag for JPMC. They should have nope'd out of that deal on the spot. I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good…

> I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good faith. Right, because it's easy to share your customer list when you have a small number of customers and they are repeat customers. Her company helped with student loans. Her customers were mostly one-time customers. The customer count was s…

Right but the privacy law excuse is nonsense. All such laws (possible exception of medical data) allow for 3rd parties to be "read in" on the data for legitimate purposes. Source: worked as a consultant for companies with private data for 20 years.

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

#232

Post by yokumfloster »

fsckboy wrote: post #116
ajross wrote: post #54

Earlier quoted context omitted.

Right, it doesn't change the direction of criminality. But nonetheless JPM is out that money regardless (maybe some will get clawed back, but probably most of it was spent). "I got scammed and the perp is going to jail" isn't a good excuse to tell your boss about you lost $175M, either. Lessons abound here. Slow down on the tech habit folks, especially if you're an investment bank and not a VC incubator.

> JPM is out that money regardless ... probably most of it was spent an MBA entrepreneur who starts a business and sells it to you for $175 million through normal channels is not likely to spend the money. this wasn't a fund wiring scam.

She never had the full proceeds in her possession. Remember, she had investors. She was venture-backed startup. She likely only had somewhere between 10% and 25% of the equity at the time that she sold the company.

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

#233

Post by yokumfloster »

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…

That’s not how it works in venture. Investors want to be rewarded immediately. There might be an earn-out, but it’s relatively minor as compared to the purchase price – maybe 10% to 25%. And just as often, it’s not an earn-out of the original purchase price – it’s an incentive to outperform on top of the purchase price.

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

#234

Post by dboreham »

teraflop wrote: post #124
randycupertino wrote: post #19

My favorite thing about this case is how she bragged to her lead engineer she wouldn't go to prison, "“Don’t worry — I don’t want to end up in an orange jumpsuit" when she was trying to convince the engineer to fabricate their user data. From the complaint: > In particular, CC-1 and JAVICE asked Engineer-1 to supplement a list of Frank’s website visitors with additional data fields containing synthetic data. > Engine…

On top of everything else, Scientist-1 doesn't come off looking too good. He was contracted to make a synthetic dataset, based on a small set of records which were supposedly randomly sampled from a larger original dataset. He didn't really have any way of knowing he was being lied to at that point, or what his work would be used for. But when he invoiced $13k for his services, including a detailed breakdown of what…

I've done consulting work a bit like this. Being asked to change the invoice: consolidate lines and change the description, is very common. If I were asked to do that I'd just do it, without questioning the reason. Being asked to do that in exchange for extra money is...very odd. Like she did something completely unnecessary that signals wrongdoing. Was she trying to get caught?

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

#235

Post by dboreham »

ryandrake wrote: post #175
randycupertino wrote: post #19

My favorite thing about this case is how she bragged to her lead engineer she wouldn't go to prison, "“Don’t worry — I don’t want to end up in an orange jumpsuit" when she was trying to convince the engineer to fabricate their user data. From the complaint: > In particular, CC-1 and JAVICE asked Engineer-1 to supplement a list of Frank’s website visitors with additional data fields containing synthetic data. > Engine…

This is why, as an engineer, it seems futile to make an ethical stand against something. They'll just find someone else to do it. Early in my career I was asked to write code to cheat a benchmark, essentially to make it seem our software performed better than it really did. I agonized over it because I was a junior developer just starting out my career, and eventually got the courage to tell my manager I wouldn't do…

Gaming a benchmark seems pretty small beer to be honest. Usually such things are presented with small print that tips off the customer, who will do their own benchmarks if they are not dumb.

Perhaps better to draw the line at things that are potentially illegal or break some obvious fiduciary duty.

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

#236

Post by dboreham »

danpalmer wrote: post #223

This feels like a case of both parties getting caught up in their own bullshit. It seems unlikely that the founder was intentionally fabricating data in order to commit fraud. Far more likely is that the founder was caught up in Silicon Valley startup culture, told they were disrupting industries and changing the world, and didn't put enough into actually doing the work, and ended up thinking their company was much m…

Yes it was dumb and dumber, but once you get to writing programs to fabricate user data for DD purposes, you're in the Bernie Madoff camp. He also defrauded dumb people, and various smart people concluded he had to be a criminal. Still a criminal.

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

#237

Post by yokumfloster »

verteu wrote: post #183
greenavocado wrote: post #181

Does anybody have the number for how much she will likely make off with ultimately ten years from now once everything settles?

I don't think she gets to keep the money - the prosecution claims she'll be "forced to pay over $300,000,000" in restitution.

And not only does she have to pay $300M – she didn’t even get the $175M that JPM paid. A lot of that — the majority most likely — went to her investors.

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

#238

Post by Mistletoe »

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…

Checks article.

>summer of 2021

Ah, I see. Probably afraid someone else would snatch up Frank before they could in the summer of mania.

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

#239

Post by boldlybold »

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…

Between this and the other compression scams mentioned in the thread, is there any connection to the show Silicon Valley? I haven’t heard of this genre of scam before but it sounds a lot like the premise of pied piper!

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

#240

Post by zoklet-enjoyer »

next_xibalba wrote: post #218
joshmn wrote: post #159

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 ther…

[flagged]

His views on sentencing have nothing to do with if he believes he did anything wrong.
Post reply on HN