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Star of “Startup.com” Charged with Accounting Fraud

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Re: Star of “Startup.com” Charged with Accounting Fraud

#41

Post by api »

dberg wrote: post #40
api wrote: post #39

Earlier quoted context omitted.

I thought you had to meet certain criteria to become public, like showing X quarters of consecutive growth and bend-over-and-grab-your-ankles audits and such? Or is there some wild west of penny stocks and cocaine that I don't know about?

They were a pink sheet stock (Penny Stock), not sure if that made things different or not.

Maybe those regulations only apply to the exchanges.

Tangentially I read about an interesting money laundering technique once. Apparently you can take two low-volume stocks and use them to launder money by effectively committing financial fraud against yourself. It works like this:

1) Take a small amount of clean money and average into a position on a cheap low-volume stock.

2) Take the dirty money and use it to pump the stock by buying in and driving it up.

3) Sell your position on the clean side. Then pick another low-volume stock and do the same again.

Apparently variations of this technique can be used to smurf money across the market. You'll lose some in the transfer but that's cost. The dirty money appears to be "lost" in the market, while the clean side books short-term capital gains. I'm sure experts would know how to calibrate their smurfing rate to avoid SEC scrutiny and minimize side-channel losses. Seems like something that could be automated with an algorithm.

The illegal drugs industry kicks off such obscene profits that there's probably an enormous market out there for creative ways to launder it all.

Re: Star of “Startup.com” Charged with Accounting Fraud

#42

Post by [deleted] »

dberg wrote: post #38
api wrote: post #35

Earlier quoted context omitted.

"like staying at hotels all the time, even though he lived an hour away by train" Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup ? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures whe…

There was no doubt money laundering happening. We also had a consulting company we hired, that we "had" to use and we paid absurd rates to. I am sure there was money flowing under the table or to fund other shenanigans. I have no idea how they kept raising money, outside to say, Video was hot at the time, and the corruption was buried in complicated accounting fraud so it wasnt front and center. If you want the detai…

[deleted]

Re: Star of “Startup.com” Charged with Accounting Fraud

#43

Post by dikdik »

api wrote: post #35
dberg wrote: post #26

I worked at ROO Media (which KIT Digital acquired) and met with Kaleil a number of times. None of us who worked there are even remotely surprised. No signs of revenue, yet we would spend like crazy and even acquire companies with magical "stock money". It was the most corrupt place I have ever worked in my life. The COO was a ghost who just spent money (like staying at hotels all the time, even though he lived an hou…

"like staying at hotels all the time, even though he lived an hour away by train" Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup ? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures whe…

"Hustlers", I loathe that word, but it's pervasive in the tech industry. I knew hustlers growing up, they sold cocaine cut with baking soda and screwed people over when they could. I don't understand how so many entrepreneurs use that word proudly.

Re: Star of “Startup.com” Charged with Accounting Fraud

#44

Post by jnbiche »

dikdik wrote: post #43
api wrote: post #35

Earlier quoted context omitted.

"like staying at hotels all the time, even though he lived an hour away by train" Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup ? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures whe…

"Hustlers", I loathe that word, but it's pervasive in the tech industry. I knew hustlers growing up, they sold cocaine cut with baking soda and screwed people over when they could. I don't understand how so many entrepreneurs use that word proudly.

> "Hustlers", I loathe that word,

I understand where that sentiment is coming from, but to be fair, I also heard the word growing up, but used to describe a certain kind of athlete - the kind who would dive into the bleachers to save a ball.

In that sense, it's like the word "hacker". A word with two diametrically opposed connotations. And it is interesting how two such potentially ambiguous words have assumed such a prominent place in SV culture.

Re: Star of “Startup.com” Charged with Accounting Fraud

#45

Post by tristan_b »

api wrote: post #39
tristan_b wrote: post #37

Earlier quoted context omitted.

It was a publicly traded company.

I thought you had to meet certain criteria to become public, like showing X quarters of consecutive growth and bend-over-and-grab-your-ankles audits and such? Or is there some wild west of penny stocks and cocaine that I don't know about?

If memory serves me right, they bought a public company for not very much (I think a carpeting company) that was failing, and folded ROO into it.

Re: Star of “Startup.com” Charged with Accounting Fraud

#47

Post by lifeisstillgood »

waterlesscloud wrote: post #28
lifeisstillgood wrote: post #23

Earlier quoted context omitted.

Why did a spy tell you she was a spy?

The fact she went to a language school in Monterey is a good hint as to her background at least. https://en.wikipedia.org/wiki/Defense_Language_Institute

I think there was some editing between comments - the whole Monterey thing is new to me.

Now of course the question is, who's side was she a spy for ;-)

Re: Star of “Startup.com” Charged with Accounting Fraud

#48

Post by vithlani »

api wrote: post #35
dberg wrote: post #26

I worked at ROO Media (which KIT Digital acquired) and met with Kaleil a number of times. None of us who worked there are even remotely surprised. No signs of revenue, yet we would spend like crazy and even acquire companies with magical "stock money". It was the most corrupt place I have ever worked in my life. The COO was a ghost who just spent money (like staying at hotels all the time, even though he lived an hou…

"like staying at hotels all the time, even though he lived an hour away by train" Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup ? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures whe…

Ah! Go read Dog Days by Dan Lyons (Fake Steve Jobs)

Re: Star of “Startup.com” Charged with Accounting Fraud

#49

Post by dberg »

api wrote: post #41
dberg wrote: post #40

Earlier quoted context omitted.

They were a pink sheet stock (Penny Stock), not sure if that made things different or not.

Maybe those regulations only apply to the exchanges. Tangentially I read about an interesting money laundering technique once. Apparently you can take two low-volume stocks and use them to launder money by effectively committing financial fraud against yourself. It works like this: 1) Take a small amount of clean money and average into a position on a cheap low-volume stock. 2) Take the dirty money and use it to pump…

I Think this is close to what he was doing. He had an investment bank friend that would just constantly sell and buy on the stock to look like there was "activity". In the end it was the same person selling and buying massive amounts of stock.

Re: Star of “Startup.com” Charged with Accounting Fraud

#50

Post by wpietri »

api wrote: post #35
dberg wrote: post #26

I worked at ROO Media (which KIT Digital acquired) and met with Kaleil a number of times. None of us who worked there are even remotely surprised. No signs of revenue, yet we would spend like crazy and even acquire companies with magical "stock money". It was the most corrupt place I have ever worked in my life. The COO was a ghost who just spent money (like staying at hotels all the time, even though he lived an hou…

"like staying at hotels all the time, even though he lived an hour away by train" Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup ? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures whe…

The thing I try to keep in mind is that nobody can make perfect decisions. We all have heuristics that work pretty well for us generally, and sufficiently clever/prepared people can abuse that.

For example, think back to Google Glass. There was a time when it was an amazing revolution about to happen. There are pictures of generally smart, experienced people wearing Google Glass and trying hard to look like the future. [1] How much got spent there? On the glasses alone, figure it was something like 100,000 units at $1500 each for a total of $150m. Google presumably spent a fair bit more on R&D and marketing, and plenty of other companies spent time and money on the platform.

Were all those people dumb? I never understood the appeal of Google Glass, so you'd think I'd be inclined to say so. But my take is that the people who gave that a go were just working with different heuristics than I am. Lord knows I've bought plenty of disappointing gadgets over the years. As long as we're write more often than we're wrong, the heuristics aren't bad, just not perfect.

So here I figure that most of the people who put in money weren't idiots; they just had different ways of judging. E.g., a lot of deals happen partly because of trust. But we all know that con men are people who are extremely good at manipulating trust-related heuristics.

[1] http://www.forbes.com/sites/tomiogeron/2013/04/10/google-lau...

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