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CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

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Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#91

Post by CatShitTodd »

caymanjim wrote: post #86
CatShitTodd wrote: post #65

Earlier quoted context omitted.

What is cruel is I am having to file bankruptcy because of this.

Not sure if you're being serious, but if you were an early investor, isn't it on you to make sure the business is legit? Anyone can be misled by a fraudster, but some responsibility lies with the VCs and angel investors throwing money at these companies and enabling this sort of thing to happen.

No, not an investor. Without giving a way too much, we are a company in the technology space. They paid us a fee per user. They paid us fees based on these fake numbers of users that they submitted to their investors. Which means they essentially over paid us what is a lot of money for our small company. We made business decisions around that money in the past and for the future. Now it looks like that not only will we get no more money, but they also want like 90% of what they paid us back.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#92

Post by CatShitTodd »

NationalPark wrote: post #75
CatShitTodd wrote: post #65

Earlier quoted context omitted.

What is cruel is I am having to file bankruptcy because of this.

Were you an investor?

No, not an investor. Without giving a way too much, we are a company in the technology space. They paid us a fee per user. They paid us fees based on these fake numbers of users that they submitted to their investors. Which means they essentially over paid us what is a lot of money for our small company. We made business decisions around that money in the past and for the future. Now it looks like that not only will we get no more money, but they also want like 90% of what they paid us back.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#94

Post by pge »

billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

Where was the board during this whole time? I have trouble understanding how a board allows a management team to operate in such a way that controls aren't in place (eg basic segregation of duties in finance) that would prevent or at minimum reveal this kind of behavior. The board should be seeing enough information that most of the flags you highlight should be visible to them. Not to mention, clearly the company was never audited. Regular audits should be standard practice for any company of that size. In any case, it will be interesting to see what consequences there are for board members that appear to have failed in their basic responsibilities.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#95

Post by throwawayYeah »

TNot surprising. he co-lead on this deal was the company I work for (insurance). This doesn t surprised me as our VC arm sometime is ego driven. Being a strategic VC they have to follow the gut feeling of board member with limited due diligence. We often worry with teamates about the VC arm investment (Serie B into Iot backed in blockchain jewelery kind of deal). The team also like to take famous SV investor content and republish it internally as own. this bit us a few time when a C suit tweet a congratulating message on great content from our firm like 'software is eating the world'. The irony here is that we are an insurance company, we should know how to prevent fraud...

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#96

Post by lmeyerov »

CatShitTodd wrote: post #65
pstoica wrote: post #59

Earlier quoted context omitted.

Decent salary, but that's not the point. I'm distraught to realize I spent 5 months on nothing, and it's not something I'm proud to have or explain on my CV. It's cruel how much money these people throw away, but we were misled into thinking it was real. I wouldn't have taken this position to support such a scumbag.

What is cruel is I am having to file bankruptcy because of this.

That is super tough and stressing, sorry!

FWIW, I would wait on returning any money (or saying anything at all, really) + talk to a lawyer with experience in bankruptcy (their's + yours).

My guess is you can keep all/most of the $. They were fraudulent to you + the company is now evaporating. Sounds like you still need to pivot, but at least you can do so with $ in the bank and no black marks.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#97

Post by [deleted] »

PragmaticPulp wrote: post #43
billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

None of it makes sense in the context of a well-run business with proper executives in place. That’s because these frauds don’t operate like a well-run business. Usually, the upper management teams are extremely lean. The business is broken up into different silos such that few people can see the big picture. Each is led to believe they are a tiny fraction of the overall revenue, giving them the impression that the b…

[deleted]

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#98

Post by solumos »

pge wrote: post #94
billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

Where was the board during this whole time? I have trouble understanding how a board allows a management team to operate in such a way that controls aren't in place (eg basic segregation of duties in finance) that would prevent or at minimum reveal this kind of behavior. The board should be seeing enough information that most of the flags you highlight should be visible to them. Not to mention, clearly the company wa…

> Regular audits should be standard practice for any company of that size.

The company was audited twice, but the auditors tied the fraudulent bank statements to the fraudulent financial statements (woops).

> In any case, it will be interesting to see what consequences there are for board members that appear to have failed in their basic responsibilities.

Full cooperation with the SEC can get you a long way, especially if you're one of the victims of fraud.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#99

Post by rmason »

If you're a VC firm shouldn't the amount of due diligence you do increase with the amount of money you're investing? Or was their investigating capacity so poor that it's a miracle they weren't cheated before?

Or are there other startups they've invested in that just haven't been found out yet? If I was one of their LP's I'd be asking some hard questions.

Re: CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges

#100

Post by lancewiggs »

pge wrote: post #94
billyhoffman wrote: post #13

Being an executive at a (substantially smaller) SaaS startup I have no idea how having up to 90% of your revenue be fabricated could happen without others knowing: - where are the contracts corresponding to revenue? Yeah they are SaaS focused on SMB but this is a financial product, there will be contracts, NDAs, etc - if the majority of the customers are fake there is such little load on the system. How does engineer…

Where was the board during this whole time? I have trouble understanding how a board allows a management team to operate in such a way that controls aren't in place (eg basic segregation of duties in finance) that would prevent or at minimum reveal this kind of behavior. The board should be seeing enough information that most of the flags you highlight should be visible to them. Not to mention, clearly the company wa…

Yes - this is the directors’ fault. As a director you have n obligation to ensure everything is ok, and for issues of this magnitude it’s clear that the directors were bamboozled. at our firm we insist on access to the financial system (e.g. Xero) whenever we have a directorship. It’s hard to fake results, at least to this level, when we can see down to the level of individual invoices.
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