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Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

businessinsider.com

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Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#81

Post by mbesto »

maxbond wrote: post #74
mbesto wrote: post #56

Earlier quoted context omitted.

> How much due digilence was done on SBF / FTX by The New-York Times and by the VCs who poured hundreds of millions into a pure fraud? NYT isn't an investor, so that's a total non sequitur. VCs on the other hand...VCs dont do much diligence. And who really cares really? They lost their money, not yours.

When VCs skip diligence and invest in a bunch of frauds like Wirecard, Greensill, FTX, etc., it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. Since huge frauds propped up by VCs seem to collapse several times a year, it doesn't seem like losing their money is incentive not to invest in frauds. It seems like they've just priced it in. Granted, t…

> it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded.

No one made you buy crypto on FTX. You have to do your own diligence.

> It seems like they've just priced it in

Ding. Ding.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#82

Post by maxbond »

mbesto wrote: post #81
maxbond wrote: post #74

Earlier quoted context omitted.

When VCs skip diligence and invest in a bunch of frauds like Wirecard, Greensill, FTX, etc., it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. Since huge frauds propped up by VCs seem to collapse several times a year, it doesn't seem like losing their money is incentive not to invest in frauds. It seems like they've just priced it in. Granted, t…

> it creates an externality we all have to deal with - we're basically subsidizing their credulousness by getting defrauded. No one made you buy crypto on FTX. You have to do your own diligence. > It seems like they've just priced it in Ding. Ding.

My mistake, I thought you were interested in a discussion about interesting topics, I see you're more interested in being patronizing on the internet. That's not really what I'm here for, so take care.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#83

Post by nico »

vkou wrote: post #52
nico wrote: post #30

Earlier quoted context omitted.

With this, SVB, FTX, it’s pretty clear that whatever paperwork is done for due diligence is just theater. The real due diligence is their networks and reputations. If the people in charge say yes, then the paperwork will support whatever they said already.

That's like saying that because people die in car crashes, seatbelts and airbags are pure theater. This is a poster-child example for confirmation bias. You don't hear about all the DD that doesn't result in a fraudulent company being purchased.

Of course there is good DD.

But what we are uncovering is that DD is not the boss or the final decision maker.

People in power can arbitrarily choose to ignore DD.

That’s what we are seeing.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#84

Post by jononomo »

mbesto wrote: post #55
loandbehold wrote: post #47

Earlier quoted context omitted.

Javice interfered in due diligence in a very sophisticated way. JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". In the end Javice was able to convince due diligence team by engaging in multiple layers of fraud. Sure due diligence team could've done a better job, but Javice was a sophisticated adversary. It's not like due diligence team didn'…

> JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". DD guy here. This is the most plausible explanation. When you're under LOI there is a lot of back and forth, which ultimately guide how the purchase agreement gets formulated. So if this was the case, then they would have made the trade off of "ok she's not letting us see the list, but we'll…

What is a DD guy? and what does LOI stand for?

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#85

Post by lordnacho »

mrmcd wrote: post #79
datpuz wrote: post #29

What was the end game here? Is there any universe where someone does something like this and gets away with it?

Previous reporting on this (when the JPM civil suit was filed) mentioned that JPM didn't care about the fafsa forms business at all. They bought them entirely to get a big pile of marketing leads to sign up young people for banking services early in their adult life before they're signed up with other banks, through a brand they're already familiar with. Considering how many "$200 to open a new checking account!!" ju…

Would the bank make 175M from 4M customers?

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#86

Post by rqtwteye »

loandbehold wrote: post #47
jjgoldman wrote: post #13

Sounds very clearly that JPMC was defrauded, and at the same time did a very poor job of due diligence in a 9 figure acquisition. How did a financial audit not uncover the dramatic mismatch in actual vs. purported activity? How does a transaction value of $41 per user (x 4.25M users) not translate to an auditable revenue stream? This doesn't look good on either party.

Javice interfered in due diligence in a very sophisticated way. JPMC tried to verify user data but Javice claimed they couldn't provide user personal information "due to privacy concerns". In the end Javice was able to convince due diligence team by engaging in multiple layers of fraud. Sure due diligence team could've done a better job, but Javice was a sophisticated adversary. It's not like due diligence team didn'…

“ Javice claimed they couldn't provide user personal information "due to privacy concerns””

That’s pretty much what Theranos did. The due diligence people walked away and threw a few hundred million more at Theranos. That’s compares to the due diligence we went through when I worked at a small startup years ago. It was only for a few million but they made us go through hell with all their information request.

Seems if you want to commit fraud it’s best to go really big. The bigger you are the less scrutiny and less consequences.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#88

Post by chadash »

cldellow wrote: post #70
chadash wrote: post #59

Earlier quoted context omitted.

A 9-figure acquisition sounds like a lot, but consider that this is less than 0.05% of JP Morgan's market cap. Their market cap is down $6 billion today, and it's not even a particularly notable day. And it's not like that money is completely gone. JPM will sue and probably recover a very large chunk of it. Say that of the $175 million, they get back $150M, so they are out $25M. It's just not that much money to them.…

> JPM will sue and probably recover a very large chunk of it Who are they going to sue? Javice's stake in the company was only worth $21M. If the rest is held by shareholders who weren't involved in the running of the company, good luck getting it back from them.

Fair point, although it was a private company with 8 investors, so it wouldn't be that crazy to file 8 lawsuits.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#89

Post by lordnacho »

tommek4077 wrote: post #38
gruez wrote: post #27

Earlier quoted context omitted.

> $175M could have easily paid for a bunch of domains to run MX servers. You don’t even have to keep the email. Just accept it and send it to /dev/null. You don't think it would be at all suspicious that most of the emails in the customer list are using weird custom domains rather than the popular ones like gmail.com or outlook.com?

Just create a big email provider with that kind of money. You might even get a legimate business out of this ;)

That's it, you create an email provider that purports to be the place where young people go to get email, lining up your next sale.

Re: Frank founder allegedly defrauded JPMorgan out of $175M hit with federal charges

#90

Post by helsinkiandrew »

toss1 wrote: post #63
fisherjeff wrote: post #45

Earlier quoted context omitted.

I mean from what I understand, they did peek at the “real data”, it’s just that it was convincingly fabricated.

You need to do more than "peek at" the real data, at least if you are buying a business for actual revenue and not for it's potential as an idea. You need to follow at least some threads all the way down to the ground truth. First, ask for 20 references of successful happy customers, talk to all of them, and do some verification. Then demand to see all the "real" data and select a random sample of 50 emails and track…

> Then demand to see all the "real" data and select a random sample of 50 emails and track them all down to real people (or not), and ask the people at those endpoints what is going on

Apart from the privacy/compliance/legal reasons that make this very difficult. A very low proportion of 50 real paying corporate customers are likely to respond to an email from a seemingly random source, change that to 50 students you’d hardly get any.

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