[HN Gopher] A sleuth's guide to the coming wave of corporate fraud
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A sleuth's guide to the coming wave of corporate fraud
Author : drooby
Score : 60 points
Date : 2022-11-13 17:13 UTC (5 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| ramesh31 wrote:
| Interesting to see this play out in the crypto world in real
| time. CZ is coming across as the only legit player left in the
| space. And it seems hard to imagine he'd be putting a spotlight
| like this on himself if things weren't airtight over there. Looks
| like Binance will be the winner take all.
| Animats wrote:
| He doesn't even have a business address.
| moralestapia wrote:
| How does he operate though?
|
| Where does he send/receive fiat?
| lazide wrote:
| Normally, Tether.
|
| Another steaming stinking bucket of goo no one wants to
| look too hard at, for fear it will actually be shit instead
| of the maple syrup they keep being promised.
| [deleted]
| buitreVirtual wrote:
| I don't think he is chasing the spotlight more than necessary
| to promote his business. Besides, chasing the spotlight does
| not imply honesty. Just look at SBF.
| skinnymuch wrote:
| SBF was in the spotlight. Possibly more than any other crypto
| person. If applied to CZ, it means he is a fraud too. To think
| his stuff is airtight makes no sense when there isn't
| transparency.
| TacticalCoder wrote:
| Coming or actual. Chamath Palihapitiya just said that the current
| SBF/FTX/Alameda fiasco goes much further than just one man and
| FTX.
|
| He says that several SV firms and VCs have been working on
| several of the shitcoins in which SBF was a cofounder and pumped
| and dumped or which SBF just pumped and dumped (already before
| FTX even existed) without being involved in their creation.
|
| SBF had its hands into a lot of things, including Solana and
| Serum (SRM), which represented $2.2 bn in USD when FTX went down
| (but which since crashed by 75% or something).
|
| SBF owns 9% of RobinHood.
|
| I'm not saying it, Chamath Palihapitiya is. Here's a recent talk
| between him and Coinbase's CEO. Jump at 20 minutes when it starts
| on crypto:
|
| https://youtu.be/Id7cNqwqt1I
|
| I do personally think Chamath Palihapitiya is right and we
| connect the dot with the article from TFA, this does indeed go
| much further than just SBF.
|
| Another one just for the gigs I recently read (facts needs to be
| checked): SBF's mom (lawyer and teacher at Stanford) ran a
| fundraising political campaign rooting for Biden. A few days
| after Biden announced he was running, SBF was apparently the
| biggest donor. Will they hand that money back to people who were
| scammed?
|
| Speaking of parents who raised ethical kids... Elizabeth Holmes,
| who defrauded investors, had as a parental example a father
| working at... Enron apparently. Just a coincidence of course.
| Daddy wasn't aware of anything. And he can be very proud of the
| way he raised his daughter.
|
| In french we say it's "un panier de crabes" (a pack of crabs).
|
| Thanks to these guys' examples I know how to not raise my kid.
| [deleted]
| lifeisstillgood wrote:
| What if we paid auditors by the fraud discovered. That auditors
| finding fraud and other misdeeds get the highest seniority on any
| assets left.
|
| I mean, there has to be some answer to the problem of an auditor
| that says "I don't like the way you treat this income stream" and
| the CEO says "we will never work with you again and I will make
| sure everyone I golf with never will again."
| ipython wrote:
| That's kind of how the SEC handles whistleblower compensation.
| See https://www.sec.gov/news/press-release/2022-125
| [deleted]
| nostromo wrote:
| I hope I don't regret saying this, but so far, this recession /
| slowdown has been very needed and will help the US economy grow
| in more sustainable ways going forward. And it's happened without
| too much pain in the broader economy.
|
| We way overdid Covid stimulus, which helped inflate bubbles like
| you saw with crypto, pouring billions into the hands of criminal
| organizations like FTX.
|
| We had cheap money flowing for too long with near-zero interest
| rates, propping up many zombie enterprises that shouldn't have
| been propped up to begin with.
|
| Salary growth is great, but we all have seen a proliferation of
| bullshit jobs with ridiculous salaries in the past two years.
|
| All of these trends have started to correct, and it'll be better
| for the long term. I just hope nothing systemically important
| breaks before we're through the worst of it.
| pjc50 wrote:
| Recession is, in and of itself, the opposite of growth. That's
| how it's defined.
|
| You can make an anti-growth argument, possibly on carbon
| emissions, but a recession cannot ever be good for growth.
| dv_dt wrote:
| I really don't have any belief that the faults in our economy
| was due to easy money. Under scarce money or easy money the
| same class of decision makers are still making poor allocation
| choices. There are no fundamental changes associated with a
| recession that would correct that imho.
| cavisne wrote:
| The past few years have been great for scammers though
|
| https://www.justice.gov/opa/pr/us-attorney-announces-
| federal...
|
| There is surely some GDP gain from not ploughing 250m of
| taxpayers money into lambo's.
| Silverback_VII wrote:
| I'm not sure about that. I see the economy as a giant engine
| made out of the flesh of millions of humans. The guy pushing
| the accelerator or not must truly feel like God hearing the
| roaring of this giant flesh engine and affecting the fate of
| so many people.
| nimbius wrote:
| "and will help the US economy grow in more sustainable ways
| going forward"
|
| how? capitalisms defining hallmark is a ten year cycle of
| boom/bust. the last solution in 2020 was a bailout and
| forgiveness for virtually all commercial covid debts. prior to
| that it was a massive bailout and payout checks to taxpayers
| along with a scorched earth foreclosure wave. at some point the
| argument comes across as an alcoholic that repeatedly crashes
| cars and promises to learn and grow from it.
|
| real wages are stagnant, homes are still unaffordable, rent is
| skyrocketing, healthcare now routinely sells insulin for $200
| and everything from energy to food is still rising. ive a tough
| time believing corporate fraud is a silver lining.
| hedora wrote:
| In the US, all of the problems you mentioned (or analogous
| issues) were solved during the New Deal era, which set the
| stage for relative economic stability post-WWII. Most of the
| laws / institutions from that time were eliminated in the
| last 3-4 decades.
|
| Anyway, the solutions are well understood. Any decent US
| history textbook contains them.
| Retric wrote:
| People blame stimulus spending, but the reduction in real
| economic output from COVID also has knock on effects.
|
| Expensive condos etc derive most of their value as a symptom of
| a much larger and extremely productive economic system which
| got disrupted. Suddenly people start reevaluating basic
| assumptions and markets adjust in ways more complex than a
| simple boom bust cycle.
| kjellsbells wrote:
| (Archive link for parent article, for anyone who cant get
| past the paywall: https://archive.ph/uk2L8)
|
| I agree with you, and in particular I have a worry that
| corporate real estate is a bloodbath whose extent is not yet
| revealed. WFH has destroyed the need for knowledge workers to
| cluster in a downtown office and all CFOs must be wondering
| how they can get out of their leases as soon as they expire,
| not only to save some costs but also to keep workers who like
| WFH happy (played right between HR head, CEO, and CFO, it
| could be touted as a benefit to employees that also saves the
| company money)
|
| SFO vacancy rates are about 15% right now (source:
| https://www.nar.realtor/blogs/economists-outlook/metro-
| offic...). NYC, 13%, double pre-COVID. See the link for the
| data source.
|
| There will be many ways to read this data and if I knew which
| way the wind was blowing I'd obviously be out there making a
| killing on CBRE instead of typing this post, but if this
| trend stays, then cities will undergo huge shifts again. I
| don't predict the death of the city (cities have gone from
| being based on geographic confluence, to defensive
| importance, to transport hubs, to industrial centers, to
| mercantile centers, to confluences of knowledge workers, and
| they will adapt again) but it's goijng to be a bumpy ride.
| moistly wrote:
| I do not believe our economy's output exceeds that of 2019,
| pre-Covid. We still have supply chain issues up the wazoo. We
| still have disease taking out employees en masse, and for
| weeks at a time. Potential customers are generally in
| worsening financial condition. I simply can not believe that
| conditions are such, that the stock market should have a
| higher valuation than it did in 2019.
| Retric wrote:
| A dollar today is worth ~15% less than a dollar from 2019
| so a stock that's nominally worth the same today would
| actually have taken a significant hit. Which really should
| be part of these comparisons.
| ericmcer wrote:
| The economic fallout is correctible, but fixing the loss of
| faith in the foundation of our economy, that diligent work will
| be rewarded with comfort and stability, will be harder.
| sammalloy wrote:
| > The economic fallout is correctible, but fixing the loss of
| faith in the foundation of our economy, that diligent work
| will be rewarded with comfort and stability, will be harder.
|
| I think this is an archaic, pre-21st century mindset.
| Advanced, industrial, technological societies should be able
| to guarantee comfort and stability for all people regardless
| of work. In the modern world, we should work because we love
| or enjoy it, because we want to contribute to society, and
| because it brings meaning to our lives and the lives of other
| people. We should not work, on the other hand, to be
| "rewarded" in a zero-sum game competing with others, to the
| detriment of the rest of the planet. We really need to change
| the way we think about this. The most productive workers
| aren't people working for a reward, they are those who love
| their work and are happy with the comfort and stability they
| already have. It's 2022 going on 2023. The idea that we
| should work based on scarcity rather than abundance is
| completely out of date and no longer supported by the
| evidence. This is the kind of have and have not mindset that
| needs to disappear. Nobody should have to work to obtain
| comfort and stability.
| lossolo wrote:
| For this you first need robotic + AI revolution, without
| this it's impossible. You need to replace significant part
| of the workforce with robots. Every human needs different
| resources/products to live, these resources have
| complicated supply chains in which you have a lot of people
| that do not enjoy their work but needs resources to keep
| their family afloat, that's why this products are available
| on the market. How many ppl like doing working in coal
| mines? How many like working in factories for 12 hours
| doing the same thing over and over again?
|
| I think what you wrote is a goal for our society but we
| need minimum of many decades of technological advances to
| even start really thinking about implementing this. We are
| not there yet.
| lazide wrote:
| There are a whole lot of 'should's' in there, without a
| whole lot of reason WHY all the people involved would want
| to do that, when they could do other things instead?
|
| If everyone could work together effectively, and no one
| would stab each other in the back, scam each other, lie to
| look better, or just screw up, etc. then hey, maybe.
|
| But then we would already be in a better place?
|
| If you figure that people will occasionally do ALL of those
| things if it benefits them (and sometimes when it doesn't),
| then what you're describing is the most incredibly rich
| target I can possibly imagine.
|
| Cheers!
| ip26 wrote:
| Nobody digs a ditch or works in a meat packing plant for
| the meaning it brings to their lives.
|
| I'm not some consummate capitalist, but there is a
| tremendous amount of necessary yet unrewarding work that
| still has to be done by human hands, and I've never seen a
| believable pitch for how that happens in these "post-work"
| pitches.
| PixyMisa wrote:
| > Advanced, industrial, technological societies should be
| able to guarantee comfort and stability for all people
| regardless of work.
|
| Advanced societies can and should guarantee food and
| shelter to all people regardless of work.
|
| They can't guarantee comfort and stability at all.
|
| > The most productive workers aren't people working for a
| reward
|
| The most productive workers are the ones working under
| crisis conditions. Not happiest. Most productive.
|
| > Nobody should have to work to obtain comfort and
| stability.
|
| Should not? Maybe. They do anyway, because that's just
| reality.
| mschuster91 wrote:
| > We way overdid Covid stimulus, which helped inflate bubbles
| like you saw with crypto, pouring billions into the hands of
| criminal organizations like FTX.
|
| Crypto was already a problem way before covid came out of a bat
| cave - the problem is _not_ the stimulus package, these saved a
| lot of lives, and they got to individual people, not
| corporations.
|
| The actual problem was the expansive monetary policy that
| virtually all major central banks followed since the 2008ff
| crisis - well over a decade of injecting absurd amounts of
| money is what caused the absolute bull run on real estate,
| stock markets, venture capital backed crap (remember Yo?) and,
| finally, once there was no other avenue for all that money
| left, into crypto.
| chinabot wrote:
| These Bullshit jobs really need to be called out more, everyone
| in a company knows who they are and they just piss off the real
| workers who see themselves (rightly) as hard done by especially
| when they are in their management chain or paid substantially
| more. Every good HR departments and CEO should earn their money
| by culling these the moment they are recognized and sanctioning
| the Manager approving them.
| datalopers wrote:
| I'm not sure if this is fraud, or simply how VCs operate, but
| we're going to see a massive collapse of SaaS startups and their
| customers in the near future. This is why:
|
| 1) Tech valuations over the past ~5 years were based entirely on
| annual revenue multiples. 25x was the norm, while 50-100x wasn't
| hard to find.
|
| 2) Let's say your VC firm owns 5% of CompanySaaS, which you paid
| $1M for, and the company is valued at 25x ARR ($800k * 25).
|
| 3) Now you invest $100k in CompanyWhatever. As their VC and
| valued advisor, convince them they should spend $100k/yr
| utilizing CompanySaaS's products.
|
| 4) CompanySaaS is now worth $900k * 25 (probably higher multiple
| since revenue is growing so fast), or $22.5M, and you just turned
| $100k into $125k.
|
| Rinse and repeat. It's a self-perpetuating bubble, and it's going
| to come crashing down hard. It's already happened but they've
| still got enough runway for another 6-24mos.
| [deleted]
| hedora wrote:
| This would only be a bubble / ponzi scheme if a significant
| fraction of B2B customers were currently backed by VC money.
|
| That isn't the case. Instead, these deals help bootstrap
| companies. Late phase investors insist on seeing per-customer
| revenue breakdowns specifically to avoid the issue you are
| describing.
|
| It is likely that startups that are becoming revenue-dependent
| in 2022-2023 are in trouble though.
| lazide wrote:
| A LOT of startup business comes from other businesses within
| the same VCs portfolio.
| keepquestioning wrote:
| If this is true then it's eyeopening. I often wonder, who
| _actually_ uses SaaS?
| lazide wrote:
| Quite a few companies do, if the SaaS has value to them.
| The challenge is, which SaaS companies have real value,
| and which ones have been working hard to LOOK like they
| have value?
|
| In the wise words of Mr. Buffett - "It's only when the
| tide goes out that you learn who has been swimming
| naked."
|
| Well, the tide is going out. Time to grab some popcorn!
| jrm4 wrote:
| _So_ not hard to see from a purely theoretical standpoint; free
| /open source or similar is always around the corner to eat your
| lunch.
|
| Unless you can figure out "What, EXACTLY, is the thing that I
| can charge them for -- meaning that they cannot get unless they
| pay me for it," you're done. And that space is pretty small.
| Not nonexistent, but small.
| paxys wrote:
| That's not how it works. If you invest $100K in a company and
| ask them to spend all of that $100K to buy products from
| another one of your companies, they will laugh at your face.
| datalopers wrote:
| It's an oversimplified example to illustrate how revenue-
| multiple valuations lead to perverse but rational investment
| strategies.
| paxys wrote:
| If you plug in realistic numbers in that example you will
| see that yes, while network effects from your VC's
| portfolio is definitely a thing, it isn't some crazy scam
| that is due to collapse.
| lumost wrote:
| I'd be curious how extensive this is. Presumably the entire
| ecosystem can't be running on VC... however I'm not sure how
| much of it is pure VC. Are SaaS firms on average going to see a
| 10% decline in revenues or a 70% decline? Or a 1% decline?
| lazide wrote:
| Definitely not all the revenue/ecosystem, but I'd be
| surprised if it wasn't at least 25%.
| [deleted]
| metadat wrote:
| https://archive.today/uk2L8
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