Has anyoine from JPMC gone to prison for 2008 yet?
Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
71–80 of 366 posts
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#72>> 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…
She pushed back on any direct vetting of the list using privacy laws as a shield and JPMorgan didn't challenge it due to competitive pressure to get the deal done ASAP. Clearly, if only 10% of the list was real, it would be pretty easy to validate that with a small random sample.
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.
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#73Earlier quoted context omitted.
> she bragged to her lead engineer she wouldn't go to prison So... obviously she was wrong. But the line between "just cutting a few corners" and prosecutable criminality isn't nearly as bright as we in the peanut gallery like to think. Lots of very successful startup launches (Uber and AirBnB are famous examples) were kinda/sorta/prettymuch illegal by the plain language of the laws they were (not) operating under. A…
I guess it all depends on how you're cheating. Are you defrauding others in your cheating? Or are you just bypassing bureaucracy like not having a Taxi service license?
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 risk as you think.
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#74>> 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…
> Seems like the most basic of OLAP queries and two days of effort would reveal very suspicious userbase. What would those queries look like?
SELECT USER_ID,COUNT(*) FROM WEBSITE_CLICKSTREAM GROUP BY USER_ID
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#75>> 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-for-...
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#76Earlier quoted context omitted.
She pushed back on any direct vetting of the list using privacy laws as a shield and JPMorgan didn't challenge it due to competitive pressure to get the deal done ASAP. Clearly, if only 10% of the list was real, it would be pretty easy to validate that with a small random sample.
The way that due diligence would have discovered this was not to take the list and start doing spot checks on it. The way due diligence should have found this is that it should have been written all over the financials. What do you mean you have 4 million customers and a support staff of 20? What do you mean you have 4 million customers but your revenue is {clearly too low}? What do you mean you have 4 million custom…
The problem here is this wasn’t about MAU. JPMorgan wanted a verified student data asset they could market to, so stale accounts were fine. Diligence focused on whether Frank had “records” (name, email, DOB, etc.), not whether those records were active.
Beyond that, JPMorgan didn’t want to push too hard and risk blowing up the deal as there was competitive pressure. Calling out “these numbers seem odd” could have spooked Jauvice, and they figured the reps & warranties in the contract gave them enough protection if things went south.
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#77Earlier quoted context omitted.
> Seems like the most basic of OLAP queries and two days of effort would reveal very suspicious userbase. What would those queries look like?
SELECT COUNT(*) FROM users would have been a start from the sound of it.
> Meanwhile, Amar purchased a list of 4.5 million real college students and their data from ASL Marketing for $105,000. Frank executives later supplemented that list — which only had email addresses for a portion of the students — by purchasing more data from an information services company.
https://www.highereddive.com/news/jpmorgan-chase-alleges-ed-...
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#78It'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…
> It's interesting how nobody talks about due-diligence being completely broken. The majority of the talk around this case has been about the due diligence failures. The judge even called it out. Consumer businesses are harder to vet. It's not like a B2B with a dozen top customers where you can call them all and confirm that sales are happening. Non-response and customer churn is expected to be a high and changing nu…
>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 faith.
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#79Earlier quoted context omitted.
I guess it all depends on how you're cheating. Are you defrauding others in your cheating? Or are you just bypassing bureaucracy like not having a Taxi service license?
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…
The clear takeaway is to ensure that the people you are harming while breaking the law do not have an abundance of money and lawyers.
Re: Founder sentenced to seven years in prison for fraudulent sale to JPMorgan
#80Earlier quoted context omitted.
The way that due diligence would have discovered this was not to take the list and start doing spot checks on it. The way due diligence should have found this is that it should have been written all over the financials. What do you mean you have 4 million customers and a support staff of 20? What do you mean you have 4 million customers but your revenue is {clearly too low}? What do you mean you have 4 million custom…
The problem here is this wasn’t about MAU. JPMorgan wanted a verified student data asset they could market to, so stale accounts were fine. Diligence focused on whether Frank had “records” (name, email, DOB, etc.), not whether those records were active. Beyond that, JPMorgan didn’t want to push too hard and risk blowing up the deal as there was competitive pressure. Calling out “these numbers seem odd” could have spo…
>> The problem here is this wasn’t about MAU. JPMorgan wanted a verified student data asset they could market to, so stale accounts were fine. Diligence focused on whether Frank had “records” (name, email, DOB, etc.), not whether those records were active.
This isnt about inactive data, they had an outside data scientist create an artificially generated usage dataset!