[HN Gopher] Founder sentenced to seven years in prison for fraud...
___________________________________________________________________
Founder sentenced to seven years in prison for fraudulent sale to
JPMorgan
Author : mandeepj
Score : 151 points
Date : 2025-09-30 12:53 UTC (10 hours ago)
(HTM) web link (www.cnn.com)
(TXT) w3m dump (www.cnn.com)
| frogperson wrote:
| He broke an unwritten, cardinal rule, which is to never steal
| from the rich.
| showmexyz wrote:
| Still what she did was fraud. From the article - "Still, the
| judge criticized the bank, saying "they have a lot to blame
| themselves" for after failing to do adequate due diligence. He
| quickly added, though, that he was "punishing her conduct and
| not JPMorgan's stupidity." "
| mothballed wrote:
| Not to justify it, but why isn't the founder of UPS (edit:
| Fedex) in prison? I don't think it was legal to go and
| literally spend their money at the casino.
|
| If you turn a profit no one cares (unless you're Shkreli,
| don't think his investors lost money, but he pissed off some
| politicians because he said the quiet parts out loud about
| how the pharma industry works), if you lose it's fraud.
|
| When all the winners are doing it, hard to compete
| otherwise... not that it makes it right.
| privatelypublic wrote:
| What are you thinking the crime would be? He bet his
| company on a literal toss of the dice instead of the
| routine figurative ones.
|
| Outside of Bribery and ?SarBox? (Whichever regulation
| handles kickbacks, etc), I can't think of anything.
| mothballed wrote:
| If you spend investor money at a literal casino while
| advertising a non-casino related business, and pay the
| investors back, probably people will view you as not
| committing a crime.
|
| If you get investor money or get a loan on the basis of
| funding logistics investments, bet it on roulette red,
| and go bankrupt, I would expect you'd be looking at hard
| jail time for fraud.
|
| So I'm thinking the crime would be nothing, because he
| was a winner, and the optics totally changed, and fraud
| relies on very subjective opinions of a jury.
| bryanlarsen wrote:
| There are lots of examples of people going to jail
| despite investors getting their money back, like SBF and
| Shkreli. Even Madoff investors got 94% of their
| investments back.
| mothballed wrote:
| Shkreli is the only one of those 3 that fully paid back
| his investors, and it took him pissing off virtually
| every politician and a bunch of wealthy insurance
| executives/administrators to get enough resources
| mobilized to get a conviction (and being one of the most
| uncharismatic people on earth, which didn't help him at
| trial).
|
| I think you are definitely in a much worse place for a
| fraud conviction if you lose money.
| bryanlarsen wrote:
| News stories said SBF investors were going to get 118% of
| their money back. Did that not happen?
|
| https://techcrunch.com/2024/05/08/ftx-crypto-fraud-
| victims-t...
| mothballed wrote:
| No because the assets ('money') deposited to SBF were
| crypto, and you just gamified it by doing a currency
| exchange to USD while disingenuously failing to note that
| in that time the USD value of the crypto went up.
|
| If you want an accurate reflection, note how much of the
| crypto deposited went in, and then how much came back out
| after SBF lost it.
|
| This would be like me depositing USD, someone stealing
| some of it, then you bragging the value went up because I
| have a larger quantity as measured in Venezuelan
| Bolivars. What actually happened is their % they recouped
| was less than 100 until you artificially change to an
| entirely different currency.
| bryanlarsen wrote:
| Sure, if you believe crypto is a currency.
| Macha wrote:
| It's not super relevant. If you were responsible for
| managing a property for someone and instead sold it
| outside your agreed authority and dumped the money into
| nvidia shares in 2020, you'd still be in trouble with the
| owner of that property even if the nvidia shares did
| better in USD terms than the property would have
| bryanlarsen wrote:
| Yes, which is why SBF is in jail for 25 years.
| BobaFloutist wrote:
| Ok, I deposit stock shares, you lose 50% of them under
| the couch, but the stock price goes up 110% so when the
| government seizes and liquidates your assets I have
| slightly more cash than the original value of what I
| deposited. Did you lose me money?
| bryanlarsen wrote:
| I didn't lose you your stake, I lost you your gains.
|
| Losing the gains put SBF in jail for 25 years. Mothballed
| original comment was "So I'm thinking the crime would be
| nothing,".
| stackskipton wrote:
| No, those repayment numbers are what their crypto was
| worth at time of bankruptcy and interest is nowhere close
| to what you could have made just doing index fund on top
| of any damage done since they didn't have the money.
|
| If I stole 1000 bucks from you 3 years ago and repaid
| 1080 back now, sure, you got some interest, but you still
| be pretty unhappy with not having access to that money.
| For some, lack of access to that money could have been
| extremely damaging.
| potato3732842 wrote:
| > (unless you're Shkreli, don't think his investors lost
| money, but he pissed off some politicians because he said
| the quiet parts out loud about how the pharma industry
| works)
|
| What's the TL;DR? His wikipedia page doesn't make it
| obvious.
| mothballed wrote:
| Shkreli's schtick was to buy out or control pharma
| companies that had a monopoly and jack the everliving
| fuck out of the prices. He had some programs for
| uninsured people, but he would milk the insurance
| companies absolutely dry, which gave him some wild
| profits.
|
| This made a bunch of powerful people absolutely enraged,
| as he was basically publicly bragging about jacking the
| ever living fuck out of the prices. Pharma companies do
| this but Shkreli would publicly say it and tell the truth
| that basically the other companies were doing it while
| pretending to be good people, and he was only being
| honest about it. Poor people were pissed because they
| were told they couldn't get their drugs (I'm unaware if
| the program that allowed uninsured people to get them for
| cheap was real or not), and the rich insurance people
| pissed because he was basically he was bilking them.
|
| So they went back and discovered one or some of his other
| early enterprises weren't profitable, but that he had
| used money he made off his later pharma enterprises to
| pay back his earlier investors.
|
| In trial, his investors testified they were happy with
| the situation, lost no money, and would invest with him
| again. But they still convicted him for fraud, even
| despite the 'victims' themselves did not believe they
| were defrauded. It didn't help that Shkreli is probably
| one of the most profoundly unlikeable people you can
| possible listen to, unless you're not bothered to hear a
| hyper-capitalist be honest about how they do business.
| potato3732842 wrote:
| Sounds like basically the big boy version of how all the
| other psychiatrists who run plausibly deniable pill mills
| will screech about the one running a flagrant pill mill
| until they lose their license.
| notmyjob wrote:
| Victims not wanting prosecution doesn't absolve the
| perpetrator as wife beaters learn all the time. I also
| think Skhreli's biggest mistake was threatening Hillary
| Clinton.
| mothballed wrote:
| If a wife says at trial she wasn't beat, it's extremely
| likely you're getting a conviction. I'm aware of a recent
| high profile case (Mike Glover) where the partner even
| had signs of broken bones and a beaten down door and the
| partner just later changed her story to those being due
| to a recreational accident outdoors and that pretty much
| terminated the case between that and her not providing a
| favorable testimony. But that's aside the point.
|
| In this case the wife never called the cops, and then
| when the cops showed up she claimed she wasn't beat, and
| not only that she has no visible marks or bruises or
| anything.
|
| And none of this is justifying any of it. Just showing
| how far outside of what we commonly see in fraud cases
| that actually get convicted.
| FireBeyond wrote:
| This is a really weird spin on Shkreli's antics.
|
| He would paint himself as a working man's hero, "I'm
| making insurers pay more so you can get your drugs
| cheaper", always avoiding the awkward questions of where
| the insurer's money came from and why premiums kept
| rising (note that I'm also not siding with insurers here,
| especially those who have implemented PBMs to leech money
| into their pockets). He basically treated the public as
| useful idiots who thought that insurance was paying more
| for their drugs out of ... charity? Goodwill? The money
| fairy?
|
| Then there was also the fact that at least once (and to a
| slightly lesser extent, twice), he went to the FDA to
| block the approval of a new drug, arguing it shouldn't be
| on the market. Why?
|
| Not because it was less effective than the market options
| - it had better results.
|
| Not because it had more/worse side effects, complications
| and interactions - it had better results there too.
|
| Not because it was prohibitive, or patenting or anything
| stifling to the market.
|
| No, it was because Shkreli had recently purchased a
| manufacturer of one of those existing drugs and their
| portfolio, and had been in the process of ramping up his
| price gouging on that drug, i.e. "The FDA should block
| approval of this better drug because it limits my ability
| to profit from my 'worse' drug."
| mothballed wrote:
| Regardless on your take about his antics, it seems clear
| the fraud prosecution had a lot more to do with his
| pharma antics than the government actually caring that
| much about how he paid back investors at prior companies,
| especially since to my knowledge none of his investors
| were going to the government with complaints. No one gave
| a shit about the guy until his (seemingly legal) pharma
| 'gouging' practices pissed off a huge segment of
| influential people.
| FireBeyond wrote:
| I do unfortunately agree with that. But to this day I
| still see people who see him as some unsung hero, and the
| prosecution of him for one of many horrible acts was one
| that only doubled down on that vision.
| 1123581321 wrote:
| There is truth to this. She was exposed because JP Morgan
| ran a marketing campaign that converted extremely poorly.
| Better purchased data might've prevented significant
| forensics. The poor due diligence had already been signed
| off.
|
| While she committed fraud, I feel sorry for her because of
| her naivety. It must've been a sick moment when they asked
| to examine the data during due diligence. If she'd known
| that would be used for marketing integration so quickly,
| maybe she would have backed out of the deal.
| miltonlost wrote:
| From the complaint: > In particular, CC-1 and JAVICE
| asked Engineer-1 to supplement a list of Frank's website
| visitors with additional data fields containing synthetic
| data. > Engineer-1 was uncomfortable with the request and
| stated, in sum and substance, "I don't want to do
| anything illegal." JAVICE and CC-1 claimed to Engineer-1
| that it was legal. JAVICE stated to Engineer-1, in sum
| and substance, "We don't want to end up in orange
| jumpsuits." Engineer-1 declined the request from JAVICE
| and CC-1.
|
| She's not naive. She was told this was illegal and then
| did it still. She knew this was fraud.
| 1123581321 wrote:
| Yes, read the same. Naive in thinking she could get past
| that and they wouldn't do anything particularly revealing
| with the data. A smarter fraudster would've backed out
| earlier with less damage.
| IncreasePosts wrote:
| She's so naive, she just hung around until someone found
| out the fraud.
|
| It made me wonder what she was thinking when her $30M
| share landed in her bank account. "Whee, I got away with
| it", "it's their problem now"?
|
| I don't think I would commit fraud, but if I did it for
| that amount, I would be on a flight to Malaysia or some
| other place with no extradition with the US!
| curiousObject wrote:
| _why isn 't the founder of UPS in prison? I don't think it
| was legal to go and literally spend their money at the
| casino_
|
| That was FedEx's founder, Fred Smith. It wasn't UPS
|
| He only had $5,000 of funds remaining, which he gambled
| playing blackjack, so the potential loss to investors was
| small. He'd already lost almost all their investments
| through operating FeDex
| FireBeyond wrote:
| The investors?
|
| At that point he had been stiffing his pilots on wages
| for weeks or months, and with many also paying fuel bills
| on their personal credit cards/checks, since many fuelers
| had canceled FedEx's accounts.
|
| Yeah, $5K isn't a whole lot, but if I'm a pilot
| struggling to put food on my family's table, and the CEO
| takes company money to Vegas, I'm not thinking "Oh, but
| the investors" or "Sure, it's not that much money
| anyway".
|
| I don't see why people (not saying you, in particular)
| see this as some heroic founder "risking it all". He
| wasn't. He was risking the company's "all", after asking
| the employees to suck up his mismanagement.
| curiousObject wrote:
| _some heroic founder "risking it all". He wasn't. He was
| risking the company's "all", after asking the employees
| to suck up his mismanagement._
|
| I agree. He was asking employees not to cash their
| paychecks sometimes. $5000 is inconsequential compared to
| that forced investment from employees and business
| partners
| IncreasePosts wrote:
| There's no knowledge as to whether he used company money,
| or personal cash/line of credit. In fact, there's no
| knowledge of the story is even true, apart from what one
| dead man wrote!
| troyvit wrote:
| I was about to go on a rant about, "Why is it ethical to put
| people in jail for doing things that only affect money? Was
| anybody at JPMorgan hurt as bad as jail will hurt this person?"
| But you already answered the question.
| fourseventy wrote:
| If I steal all your money I shouldn't go to jail?
| taytus wrote:
| same as Theranos
| arbuge wrote:
| She
| ChrisMarshallNY wrote:
| _> He broke an unwritten, cardinal rule, which is to never
| steal from the rich._
|
| "She".
|
| The name is "Charlie," but it's a young woman.
|
| And, like another young woman, she stole from the rich, and got
| jailed.
|
| She'll probably get a federal minimum-security prison (no
| fences and a golf course).
|
| They aren't quite "Camp Cupcake," but they are a far cry from
| places like Leavenworth (I've known folks that have done time
| in both).
| Aurornis wrote:
| Believe it or not, smaller fraudsters get prosecuted all the
| time, too. One of the news reporters I followed on Twitter in
| my area liked to follow all of the small cases of real estate
| and business fraud in my area. There were a lot of prosecutions
| for people who were stealing <$10K at a time through affinity
| fraud and fake business investments.
|
| You just don't hear about them as much because someone going to
| jail for stealing $60K from a couple families from their church
| in a fake real estate scheme isn't as exciting as a massive
| fraud against JP Morgan.
| HankStallone wrote:
| A few years ago the manager of our local Menards got
| convicted of stealing over a half-million dollars over 5
| years. She only got 180 days, too, and was allowed to leave
| the jail for work. Depending on how high on the hog she lived
| for those five years, she might figure it was worth it.
|
| I knew one local HVAC company where the office manager
| skimmed off six figures over something like 20 years before
| she got caught. Just slow and steady, never taking enough to
| be obvious, I guess. It happens more than people would think.
| wil421 wrote:
| I knew a guy whose parents basically invented thrift
| stores. He's accountant did the same thing while he was
| battling drug addiction. Not sure if she ever got
| prosecuted I think the owner wanted to move on. Then he
| died of a heart attack.
| rdtsc wrote:
| > He broke an unwritten, cardinal rule, which is to never steal
| from the rich.
|
| Right from the article
|
| > Addressing the court before she was sentenced, Javice,
|
| "she was" ...
|
| The title even:
|
| > Charlie Javice sentenced to seven years in prison for
| fraudulent sale of her startup
|
| "her startup" ...
|
| Kind of curious, how did you determine their gender? Guessing,
| saw the title on HN only without clicking on the link assumed
| it must be a "him"?
| rchaud wrote:
| > Javice appeared regularly on cable news programs to boost
| Frank's profile, also once appearing on Forbes' "30 Under 30"
| list.
|
| ...alongside other scrupulous business luminaries like Sam
| Bankman Fried, Shkreli and Holmes.
| jordanb wrote:
| The Management Consulting to Prison Pipeline.
| renewiltord wrote:
| Lol the biggest loser here is the ad tech company that was used
| to validate the entirely generated emails and somehow gave JPMC
| the belief that the emails matched in the DB. Get fucking rekt.
| exasperaited wrote:
| Sentenced to a really, really expensive purchase of Trump
| shitcoin. I'm sure he can find something to like about someone
| who made a fool of JPMorgan.
| generalpf wrote:
| Another Forbes 30 under 30!
| duxup wrote:
| It's funny how a lot of those media blurb lists are just "this
| person says they're doing things at a functional business".
| TuringNYC wrote:
| >> 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 effort would reveal very suspicious
| userbase.
| upupupandaway wrote:
| One previous company I was CTO of got acquired by Amazon and
| they spent 60 days going through everything, including every
| line of code. I doubt a fraud of this caliber would have gone
| unnoticed with that kind of due diligence.
| vjvjvjvjghv wrote:
| Sometimes I wonder if there is a lot of scrutiny in small
| things but when things get large and complex they basically
| give up and wave it through.
|
| I see a similar thing at my work in medical devices. In
| theory we have to validate all libraries we are using. So if
| you want to share some code you have to create a ton of
| documents. But when we use something like nodejs with
| hundreds of dependencies the whole process basically gets
| handwaved away because validating everything would be too
| much work.
| brandall10 wrote:
| It's not that complex, there was nothing technical here.
| You could say this was 'social engineering' at some level.
|
| She pushed back against access to the customer list
| claiming privacy laws as a shield. JPMorgan was overly
| eager and didn't want to blow up the deal by challenging
| her.
| chatmasta wrote:
| I wouldn't be surprised if they waved it through because
| "who would be dumb enough to provide us a fraudulent list
| of customers?" She was always going to be discovered once
| they tried to market to the list. So I could see them
| speedrunning due diligence under the assumption that, if
| it's totally fraudulent, it will be obvious eventually and
| then we'll sue her. The deal is not large enough to affect
| our bottom line, and the obvious risk of defrauding us
| makes it unlikely she's defrauding us.
| wat10000 wrote:
| In programming, this is called bikeshedding. You present
| plans for some massively complicated industrial plant, and
| people will mostly skim it. Then you want to build a small
| bike shed for construction workers to use during the
| project, and now that they're presented with something
| understandable, everyone involved has to have input and the
| whole process drags out.
| jlarocco wrote:
| The article says the judge called them out for not doing enough
| due dilligence.
|
| The fact that they didn't do enough research doesn't mean it's
| okay to scam them, though.
| ajross wrote:
| Right, it doesn't change the direction of criminality. But
| nonetheless JPM is out that money regardless (maybe some will
| get clawed back, but probably most of it was spent). "I got
| scammed and the perp is going to jail" isn't a good excuse to
| tell your boss about you lost $175M, either.
|
| Lessons abound here. Slow down on the tech habit folks,
| especially if you're an investment bank and not a VC
| incubator.
| fsckboy wrote:
| > _JPM is out that money regardless ... probably most of it
| was spent_
|
| an MBA entrepreneur who starts a business and sells it to
| you for $175 million through normal channels is not likely
| to spend the money. this wasn't a fund wiring scam.
| CodeWriter23 wrote:
| > The fact that they didn't do enough research doesn't mean
| it's okay to scam them, though.
|
| True, if one does not mind risking the Orange Jumpsuit
| scenario
| lurkshark wrote:
| I wonder if there was an aspect to it where the scam was so
| audacious that they figured it wasn't a scam. Like a "there's
| no way they would generate millions of fake users which would
| obviously get caught post-acquisition, we must be missing
| something"
| MangoToupe wrote:
| > The fact that they didn't do enough research doesn't mean
| it's okay to scam them, though.
|
| It is absolutely, 100% morally OK to scam investment bankers.
| It's just not legal.
| bix6 wrote:
| $175M isn't that big for JPM. It's only 0.02% of its market
| cap.
| NickC25 wrote:
| They also have $4.3T in AUM. $175M for them is quite
| literally pennies to them.
| paxys wrote:
| AUM isn't relevant because it isn't their money.
| bix6 wrote:
| Well they get fees on it so what do they care?
| paxys wrote:
| They only get fees if you use their wealth management
| services. You can open an account and start trading
| stocks/ETFs for free, and they get nothing.
| bix6 wrote:
| Not true. They get payment for order flow, spread
| capture, cash sweep, securities lending, etc.
| paxys wrote:
| None of which has anything to do with their AUM
| bix6 wrote:
| Sure AUC what's up with all the nitting sheesh!!!
| zeusk wrote:
| AUM is not theirs to keep; and market cap is a very
| deceitful metric especially for banks where liabilities
| dwarf the market cap.
| bix6 wrote:
| My point is that it's a minor transaction for them
| brandall10 wrote:
| 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.
| jerf wrote:
| 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 customers but your website spend is {clearly too
| low}?
|
| It's over an order of magnitude. It should be written all
| over the company. Experienced DD should have smelled a rat
| within about 2-3 hours, although nailing it down could take
| much longer. The logical conclusion I draw is that there was
| no experienced DD done. In isolation this would a tough
| claim, however, I look around and I see a lot of Wall Street
| activity on this time frame that shows no evidence of Due
| Diligence being done and it seems to be part of a pattern.
|
| (The question of _why_ there was no DD is a separate one.)
| brandall10 wrote:
| 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.
| TuringNYC wrote:
| >> 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!
| brandall10 wrote:
| That's not what I said.
|
| JPMorgan thought they were getting legitimate users of
| the product at some point in time - they didn't care
| whether or not they were currently active, hence vetting
| ops didn't really matter much.
| wat10000 wrote:
| Funny how that has the exact same shape as a typical scam
| targeted at individuals. They usually rely on creating a
| sense of urgency and the sense that you could blow the
| whole thing if you aren't careful. A warrant scam will
| tell you that they need payment (in gift cards, of
| course) _right now_ or you 're going to jail, and
| likewise if you hang up or tell anyone what's going on
| (and thus might have someone tell you that you're being
| had) you're going to jail.
|
| Not far off from "you can't inspect the business you're
| buying too hard, or the deal is off." And just like with
| individual scams, that should be a sign that it's shady
| and you should bail out.
| brandall10 wrote:
| Of course, but this is basic human psychology when power
| asymmetry is at play. Frank "held the cards" in this
| deal, so to speak, and was helmed by a CEO that
| demonstrated sociopathic tendencies willing to do
| whatever it took.
|
| You can of course hold to a particular standard, but if a
| competitor is willing to relax that standard, you lose a
| distinct advantage.
| hobs wrote:
| No you don't - they are now vulnerable to scams and you
| are not.
| brandall10 wrote:
| For this deal, sure. What about others? Many times your
| competitors will come out ahead.
|
| Risky decisions happen all the time in business, as long
| as the risk is outweighed by the perceived reward.
| simonsarris wrote:
| > What do you mean you have 4 million customers and a
| support staff of 20?
|
| Sure to the rest, but: Whatsapp had 55 employees and 450
| million users when it was acquired. It's at least
| conceivable to tell a story (lie) that's two orders of
| magnitude smaller. (And the real number was "only" off by
| one zero.)
| jerf wrote:
| Consider it holistically, rather than one at a time.
| Every company has its own footprint of "per customer"
| resource usage, and every company probably has unusually
| low aspects one way or another, but when a company comes
| back as "low" to "very low" for _every_ such metric, it
| 's time to investigate harder. Maybe they're just that
| genius, or maybe there's something about the company you
| don't understand yet, or maybe they're cheating you...
| the whole point of due diligence is to resolve those
| "maybes" into "certainlies", because they all factor in
| to your decisions.
| pessimizer wrote:
| Whatsapp elaborately explained how it was doing this to
| the public, it was with a technology (Erlang/OTP) that
| had rarely been used before, and that technology had been
| designed for and very successful in an almost identically
| shaped context (telecom switches.)
|
| Also, more obviously, people you knew were using it every
| day. 450M is different than 4M, and way different than
| 300K. If Whatsapp were lying and saying they had 4.5B
| users, I'd expect JP Morgan to catch that within a few
| hours, too.
| Dylan16807 wrote:
| > Whatsapp elaborately explained how it was doing this to
| the public, it was with a technology (Erlang/OTP) that
| had rarely been used before, and that technology had been
| designed for and very successful in an almost identically
| shaped context (telecom switches.)
|
| Sure. But the point is, Whatsapp had 0.5 total employees
| per 4 million users, and Frank had 20 support employees
| per 4 million supposed users.
|
| Even if you think Whatsapp has a _massive_ advantage,
| those numbers don 't make it look like Frank is the one
| that's lacking in staff.
|
| > Also, more obviously, people you knew were using it
| every day. 450M is different than 4M, and way different
| than 300K. If Whatsapp were lying and saying they had
| 4.5B users, I'd expect JP Morgan to catch that within a
| few hours, too.
|
| For these reasons it would be much harder for Whatsapp to
| lie that way.
|
| The corollary of that is it would be much easier for
| Frank to do it.
| TuringNYC wrote:
| WhatsApp doesn't need staff because they weren't
| processing regulated financial transactions. Thr app
| operated in a best efforts basis since it was mostly
| free. You don't need customer support staff for that --
| there is no support.
| cheema33 wrote:
| > Whatsapp had 55 employees and 450 million users when it
| was acquired.
|
| WeWork had the opposite problem. A lot of employees and
| expenses and not enough paying users. Having lots of
| employees and lots of expenses by itself doesn't mean
| much. WeWork still got billions in funding. Due diligence
| was an issue there as well.
| mbesto wrote:
| > Sure to the rest, but: Whatsapp had 55 employees and
| 450 million users when it was acquired.
|
| JPM regularly acquires businesses that do not look like
| WhatsApp and look more like Frank. For 99% of the
| acquirers out there, seeing a business with $450m in ARR
| with 55 employees definitely makes your eyes bulge.
| TuringNYC wrote:
| WhatsApp didn't process financial txns and wasn't in a
| regulated marketplace.
| danielmarkbruce wrote:
| A good fraudster has a good chance in any space where users
| don't pay for the service. Users, traffic, basically
| everything that isn't cold hard cash can be faked very well
| these days.
| TuringNYC wrote:
| 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.
| gruez wrote:
| Presumably JPM didn't have prod db access to run whatever
| queries they want, and had to ask for access. They also
| faked user tables. What makes you think they wouldn't have
| faked the user activity table as well?
| TuringNYC wrote:
| Ok so sometimes when people come to me for an angel
| investment I ask to look at their Pendo/GA records. I
| mean you could fake those, but that's a lot of work and
| possibly harder than actually getting the business in the
| first
| mbesto wrote:
| > 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.
|
| DD guy here.
|
| This is more common then people think. M&A deal dynamics are
| funny and this is usually a tactic that investment bankers
| who represent sellers use. According to my cursory research
| she didn't use an investment banker. For someone fresh out of
| biz school with no M&A/banking experience that's umm...BOLD.
| cactusplant7374 wrote:
| > Seems like the most basic of OLAP queries and two days of
| effort would reveal very suspicious userbase.
|
| What would those queries look like?
| jon-wood wrote:
| SELECT COUNT(*) FROM users would have been a start from the
| sound of it.
| cactusplant7374 wrote:
| > 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-...
| TuringNYC wrote:
| SELECT USER_ID,COUNT(*) FROM WEBSITE_CLICKSTREAM GROUP BY
| USER_ID
| sontek wrote:
| SELECT COUNT(*) FROM users WHERE date_deleted IS NULL AND
| date_last_activity >= CURRENT_DATE - INTERVAL '120 days';
| chatmasta wrote:
| If you read the details in some of the earlier articles about
| this, they avoided plenty of due diligence. But she also went
| to great lengths to prevent them from completing that due
| diligence. And for the minimal due diligence she _did_ permit
| them to undertake, she only ever sent them fraudulent data and
| documentation.
| diognesofsinope wrote:
| There was an article on Bloomberg or WSJ that said the
| Director in the acquisition had a Teams chat where she said
| "sometimes you don't need to do due diligence at all" lol
| tverbeure wrote:
| 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-...
| pinewurst wrote:
| Once upon a time, I was strenuously recruited by a startup
| with similar, if not quite as extreme, codec promises. When I
| understood that my job would be rigging demos while trying to
| realize the non-software founder's "algorithm", I pretty much
| had to fake my own death to escape them. Shudder...
| cheema33 wrote:
| Video codec compression scams remained popular even in early
| 2000s. I worked for a very large public tech company. One of
| the top 10 in that era. And they fell hard for scammers from
| Las Vegas that promised revolutionary audio/video
| compression. We had to sign all sorts of NDA and couldn't
| look under the hood of what they delivered to us under
| penalty of breach of contract and all that stuff. I
| "accidentally" ended up looking under the hood and couldn't
| believe what I found. I reported the findings to my manager
| and told him to do what he wanted to with that information.
|
| Long story short, the whole project got shut down and about
| 200 people working on project lost their jobs. Myself
| included. Luckily I quickly landed at a better place working
| on more meaningful things.
| lumost wrote:
| Was the scam that the codec had the raw video in it, so the
| "files" could be made trivially small?
| jacquesm wrote:
| The one I looked at had a little video receiver in the
| box. You can draw your own conclusions from there.
| Ifkaluva wrote:
| My conclusion is "they were storing the video in the
| cloud"? (Tongue in cheek interpretation)
| neilv wrote:
| > _I reported the findings to my manager [...] the whole
| project got shut down and about 200 people working on
| project lost their jobs. Myself included._
|
| Good for you for reporting the threat. But I'm a little
| surprised that they let the messenger get killed along with
| all the other innocents.
|
| I knew someone who whistleblew to C-suite, about
| misrepresentations they realized, on something that was
| then an existential threat to one of the top companies in
| its market. A series of layoffs and (IIUC) some M&A later,
| most of the employees were gone, but that one middle-aged
| engineer who warned C-suite (averting an even worse fate
| for the company) escaped all the layoffs, and was still
| there.
| jacquesm wrote:
| I did DD on that for another group of investors and caused
| them to walk away. Interestingly, they _too_ were scammers
| but of a completely different level.
|
| I think the 'inventor' (loose use of the term, nothing really
| got invented) was a true believer, he basically thought that
| if only he could get his hands on some capital that he would
| be able to make it work. He simply did not have the
| background required to see that it could never work in the
| way that he proposed. Nicely faked demo though :)
|
| I would do a write-up if I didn't think the case was more of
| a sad one than of someone trying to rip off investors, Jan
| Sloot just wasn't that kind of guy from my interaction with
| him. Maybe he did invent something: "Fake it before you make
| it".
| magicalhippo wrote:
| I came up with a similarly impressive compression scheme as a
| young teen, shortly after I started programming.
|
| It was beautiful in its simplicity. Take 5 bytes, compute a
| 4-byte checksum, and just store the checksum. After all the
| chances of a checksum collision is miniscule.
|
| When decompressing just iterate over all 5-byte values until
| you get the correct checksum.
|
| The fantastic feature was of course that you could apply this
| recursively if you needed higher compression ratios.
|
| Took me a good hour or so before I caught up with reality.
| tverbeure wrote:
| DOS International was a German magazine in the early
| nineties with excellent technical explanations and program
| listings. One of them was a super compressor that used your
| recursive technique. I didn't quite understand the details
| that were given in the description of the algorithm (I
| blamed my mediocre understanding of German), but it sounded
| legit.
|
| So I spent a good hour to type in a page of impossible to
| follow C code with obscure numbers in lookup tables and all
| it did when I ran the program was to print out "April 1.,
| April 1.".
| atombender wrote:
| I had another hairbrained idea once. Let's say you want to
| compress the number 5384615385. Find two numbers x and y so
| that x/y equals some number whose decimal part is
| 5384615385. In this case, that's 7/13. So the compressed
| output is just 7 and 13, which could be encoded very
| succinctly, thus saving lots of storage space; and
| decompression is just multiplying numbers.
|
| Unfortunately, while the idea works for some input
| sequences, most numbers aren't rational, and most sequences
| would require numerators/denominators that would be larger
| than the input. So not practically feasible.
| mdemare wrote:
| So bizarre! It really shook my belief in Philips' competence
| at the time.
|
| I mean, take a 100 minute movie, sliced into 1-second clips.
| 8kB is not even enough to store all possible orders you could
| put those clips in. I would hate to think so ill of any of my
| friends or colleagues to think that they could believe such
| an obvious fraud.
| aeve890 wrote:
| Is it a sort of reversible pseudo-hashing function even
| possible? Or something like a seed in a deterministic
| procedural generator. You could store arbitrary data in a
| few bits. 8kb for all the redundancies and metadata even.
|
| On a second thought, the compression alone would destroy
| information. NVM.
| emmelaich wrote:
| Perhaps you can help me; I can't find the original story of
| the following.
|
| A similar scam was being demonstrated to transmit data
| wirelessly at a very high speed due to some fancy
| compression. The demo was between stations with a river in-
| between.
|
| The investigators lifted the box and found an optical cable
| which was buried and went under the river.
| danielmarkbruce wrote:
| You often don't get to "inspect the goods" at a user by user
| level.
|
| Put yourself in the shoes of a non-fraud company where the
| asset is your customer set. Do you let JPM go through line by
| line confirming each one? No, you do not. You give redacted
| data or aggregate data.
|
| In eyeballs/non-paying user businesses, this is just going to
| happen sometimes. In practice you don't get to do the diligence
| you want to do sometimes.
| TuringNYC wrote:
| Doesn't the Data Room solve this?
|
| https://carta.com/learn/startups/equity-management/data-
| room...
| danielmarkbruce wrote:
| No.
|
| There is no magic in buying/selling businesses, just put
| yourself in the shoes of the seller. JPM promise not to
| ever use that customer list you put in the data room should
| the deal fall over? How would you ever know if they did?
| You wouldn't trust a potential buyer and in practice
| companies do not. They'll put information in the data room,
| but not customer level details unless anonymized at which
| point you are back where you started as far as validating
| users.
|
| So you are left with various legal/contractual solutions -
| things like "representations and warranties" (ask chatgpt
| about them), escrow agreements etc etc. And when it all
| goes to hell you go to court with your contract and attempt
| to get the money back. Such is life.
| jcims wrote:
| I'm sure there are those that have had different experiences,
| but I've been party to several M&A due diligence exercises
| (including >$1B) at a large financial and there is *tremendous*
| pressure (on both sides) to move quietly (MNPI baby), quickly
| and not destroy your relationship with the acquired entity in
| the process. The business wants the sale to close, you're
| looking for issues that could be leveraged in the deal and/or
| actual show-stoppers. The interactions are clumsy as they are
| managed through third party portals that keep the data locked
| down and in escrow. The sell-side entity still has every right
| to protect their intellectual property until it's parceled in a
| contract, so you're not going to get access to shit (unless
| they are stupid I suppose). It's going to be in an audit-like
| situation where you are going to ask someone for samples (which
| obviously can be groomed) or doing screen shares and taking
| screenshots or similar.
|
| The fact that the acquirer is large is somewhat immaterial, the
| teams 'under the tent' doing the investigation are going to be
| relatively small on both sides, including folks from the
| business trying to close the sale, internal/external counsel
| and singular SMEs from relevant domains.
| Scubabear68 wrote:
| I've been involved in a lot of due diligence efforts, from the
| tech side but I've seen all angles of it as the deals are often
| fast and intense and the various teams have to often coordinate
| to a degree (tech, legal, financial, tax, etc).
|
| It is fairly common for the people initiating the acquisition
| to really want to close it in a hurry, and they do due
| diligence only as a check mark in someone's list. As someone
| else here mentioned, there is enormous pressure to close, and
| any red flags are often redirected, reworded, or even
| occasionally just squashed.
|
| The further away a company is from something like private
| equity, who does acquisitions like we eat breakfast every day,
| the more likely you are to see rushed and potentially botched
| due diligence. Someone like a big bank may well have the main
| proponent not know anything at all about acquisitions or due
| diligence, and just wants to "get 'er done".
|
| It is also very common for people to come in after-the-fact and
| do a second diligence, and while doing that diligence to hear
| one or more people opening the conversation with "I warned them
| about this before the acquisition...".
|
| At the end of the day, particularly in a big public corp,
| people are focused on their bonuses and total comp, and people
| like that aren't going into a due diligence looking for red
| flags and "no's".
| tootie wrote:
| I remember when HP announced their plan to acquire Autonomy. I
| was very familiar with their tech and their status in the
| industry at the time and knew they were approaching irrelevance
| with no chance to boost sales of anything. They completed the
| deal anyway, which was followed by HP firing their CEO,
| lawsuits for misrepresenting their financial status and a
| complete writedown of the total acquisition cost. It seemed so
| obvious to me and my colleagues were doing integrations and
| software procurement and yet HP was completely blinded by
| everything besides their fabricated balance sheet.
| atombender wrote:
| Reading about Autonomy, it always confused me that Mike Lynch
| was found guilty of fraud in the UK but exonerated in the US
| -- what's your take on that?
| randycupertino wrote:
| My favorite thing about this case is how she bragged to her lead
| engineer she wouldn't go to prison, ""Don't worry -- I don't want
| to end up in an orange jumpsuit" when she was trying to convince
| the engineer to fabricate their user data.
|
| From the complaint:
|
| > In particular, CC-1 and JAVICE asked Engineer-1 to supplement a
| list of Frank's website visitors with additional data fields
| containing synthetic data.
|
| > Engineer-1 was uncomfortable with the request and stated, in
| sum and substance, "I don't want to do anything illegal." JAVICE
| and CC-1 claimed to Engineer-1 that it was legal. JAVICE stated
| to Engineer-1, in sum and substance, "We don't want to end up in
| orange jumpsuits." Engineer-1 declined the request from JAVICE
| and CC-1.
|
| > shortly after Engineer-1 had declined the request to create a
| synthetic data set--CHARLIE JAVICE, the defendant, contacted
| Scientist-1 and asked him to create the synthetic data set. In
| JAVICE's communications with Scientist-1, she falsely represented
| that the data she provided to Scientist-1 was a random sample of
| a much larger database of Frank users.
|
| > Also on or about August 3, 2021, JAVICE forwarded to
| Scientist-1 the Access Link Email sent to her by Engineer-1.
| JAVICE wrote, "here is the link. will share credentials offline."
| Based on Scientist-1's communications with JAVICE, Scientist-1
| understood that the data available via the Access Link Email--a
| data set of approximately 142,000 people--was a random sample of
| a larger database which contained data for approximately 4
| million people.
|
| source: https://www.justice.gov/usao-sdny/press-
| release/file/1577861...
| ajross wrote:
| > 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. And
| they got stinking rich! PG himself has an example in one of the
| very early essays about how Viaweb kinda just skipped most of
| the early bureaucracy and accounting they were supposed to have
| been doing, figuring it would all just work out. And it did.
|
| Kids see those examples and figure that a little cheating here
| or there probably isn't going to send them to jail. And it
| usually doesn't. Except when it does. And the distinction, for
| a lot of people in this community and right here on this forum,
| is very much a "There but for the grace of God go I"
| phenomenon.
|
| Startup culture tells you to cheat, basically. Knowing how
| _not_ to cheat isn 't in the instruction manual.
| giancarlostoro wrote:
| 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?
| ajross wrote:
| 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.
| Scaevolus wrote:
| 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.
| giancarlostoro wrote:
| Did they sue for damages? JP Morgan did not waste time.
| paxys wrote:
| What was the fraud? Limo services were always allowed in
| NYC, and didn't have to abide by the medallion system.
| All Uber did was make it more efficient to find and book
| a Limo.
| saalweachter wrote:
| Limo services are also regulated by the TLC in NYC.
|
| The rules are different between taxis and black cars, but
| there are still rules.
| paxys wrote:
| Uber drivers need a TLC license in NYC and fall under the
| same regulations.
| ozim wrote:
| Was this true from the very start of Uber in NYC?
| Aurornis wrote:
| > Existing taxi medallion holders were absolutely harmed
| by Uber. Existing licensed hotel operators were
| absolutely harmed by AirBnB.
|
| Then they should have sued and sought a judgment if they
| had a claim.
|
| This is the NIMBY argument in a different market: Can't
| let anyone else build anything because it might reduce
| the value of what I have, thereby harming me.
|
| It's not the same as materially misrepresenting a
| financial investment.
| xmprt wrote:
| > We just think THOSE rules were bad but THESE rules are
| good
|
| That's kind of how society evolves isn't it? Rules are
| always changing and that's generally a good thing. Some
| rules are pretty set in stone throughout history - eg.
| murder and fraud are generally bad. Other rules around
| free speech, slavery, energy usage/production, social
| safety nets, etc., have changed for the better.
|
| You could argue that Uber and Airbnb are worse but I
| think the fact that they've stuck around despite
| allegedly breaking rules means that most people prefer
| the new state of affairs that they resulted in. If
| something else comes up that breaks rules set by Uber and
| results in something better (eg. autonomous vehicles?)
| then I'm sure people will gravitate to that new thing as
| well.
| tptacek wrote:
| No, your logic doesn't hold. The distinction being drawn
| here is between civil and criminal liability. Operating
| an unlicensed taxi service in most municipalities (maybe
| all of them) is a civil infraction, not a crime.
| ajross wrote:
| Sure, because it's not my logic!
|
| The founder in the linked article thought that she was on
| the right side of the line. She wasn't. You personally
| might think you're too smart to[1] fall afoul of this
| kind of thing and that all your cheating[2] will be non-
| prosecutable.
|
| But quite frankly most "criminally liable"
| misrepresentations to investors aren't prosecuted
| (basically none of them are), so the fact that this one
| was is more a statement about the influence of JP Morgan
| and the mind of this one prosecutor. And blanket
| statements that absolutely none of Uber's shenanigans
| were prosecutable seem laughable. Crimes abound.
|
| The point wasn't to nitpick about crimes and penalties.
| It was that this crime happened in the context of a
| culture that structurally encouraged it, and we would all
| do well to recognize that instead of nitpicking fake
| reasons why it would never happen to us.
|
| [1] The ironic analogy to hubris in security analysis
| isn't lost on me
|
| [2] Because again in this world All Founders Cheat a
| Little Bit. We all know it.
| tptacek wrote:
| I agree that people shouldn't kid themselves about
| criminal liability, but not that criminal liability is
| routinely incurred by startups.
| Aurornis wrote:
| Not really the same thing.
|
| Material misrepresentation of a business is blatant financial
| fraud.
|
| If you sell someone a yellow-painted piece of metal but you
| tell them it's solid gold, you're not bending the rules a
| little bit. You're just defrauding them.
| bryanlarsen wrote:
| classic article: Everything Everywhere is Securities Fraud.
| https://www.bloomberg.com/opinion/articles/2019-06-26/every
| t...
| paxys wrote:
| The takeaway here is that you can defraud people and you can
| defraud the state, and will likely get away with it with a
| slap on the wrist (unless you steal a crazy big amount like
| FTX did). If you defraud rich and powerful investors, well
| that's a different story.
| Voloskaya wrote:
| > 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
|
| The line maybe isn't bright, but faking data to a potential
| buyer to make it appear like you have 15x your actual number
| of users is clearly way past the line you cannot see.
|
| That would be like saying it's hard to know if noon is during
| the day or night because the exact moment that qualify as
| "dawn" is hard to discern.
| IAmBroom wrote:
| > 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.
|
| Not prosecuted, and not prosecutable, are two different
| things.
|
| > And they got stinking rich!
|
| Which in no way validates their actions, ethically nor
| legally.
| miltonlost wrote:
| > 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. And they got stinking
| rich!
|
| I, for one, would hope "don't commit crimes!" is taught in
| business school ethics. (LMAO as if an MBA has ethics)
| teraflop wrote:
| On top of everything else, Scientist-1 doesn't come off looking
| too good.
|
| He was contracted to make a synthetic dataset, based on a small
| set of records which were _supposedly_ randomly sampled from a
| larger original dataset. He didn 't really have any way of
| knowing he was being lied to at that point, or what his work
| would be used for.
|
| But when he invoiced $13k for his services, including a
| detailed breakdown of what he did, Javice came back and offered
| him an extra $5k if he would change the invoice to a one-liner
| that just said "data analysis services". And he immediately
| agreed.
|
| I find it hard to believe someone could get that request and
| not understand that they were being asked to be complicit in
| fraud. At best, it's really poor judgment.
| ryandrake wrote:
| This is why, as an engineer, it seems futile to make an ethical
| stand against something. They'll just find someone else to do
| it. Early in my career I was asked to write code to cheat a
| benchmark, essentially to make it seem our software performed
| better than it really did. I agonized over it because I was a
| junior developer just starting out my career, and eventually
| got the courage to tell my manager I wouldn't do it. He said,
| that's OK and then assigned it to Bob, three cubicles down who
| didn't have any problem with it and finished the cheat in a few
| days.
| mwambua wrote:
| [delayed]
| firefoxd wrote:
| At an investor event, a desperate journalist was running around
| the room asking people their age. He ended up at our table, with
| a drink in hand, and a defeated look on his face. He had given
| up.
|
| We talked a bit, and he asked me, "are you under 30?" I answered
| "No. But this guy is." I pointed at the 28 year old cofounder of
| the start up I was part off. Before the evening was over, my
| colleague made it to the list of forbes 30 under 30.
| robertlagrant wrote:
| Do you know the journalist's name? I'd love to be part of
| Forbes' 10 billion under 10 billion.
| teachrdan wrote:
| The Onion had a listicle entitled "80 Under 80 -- and five
| 79-year-olds to watch out for." Once again they nailed the
| inherent vacuousness of modern news.
| Aurornis wrote:
| The people I know who made the 30 under 30 list approached it
| like a massive campaign they had to win. It was a full-court
| press to get in front of the right people and their startup's
| PR releases were all timed to impress for the 30 under 30
| during that period.
|
| Maybe times changed since it became more of a running joke. At
| one point it was a selling point for fundraising that people
| would compete hard over.
| code4tee wrote:
| Every person I personally know on this list made it their
| life mission to be on the list. It was lost on them that the
| whole thing has become a running joke that everyone else
| thinks is just full of grifters.
| FireBeyond wrote:
| Being on the 30 under 30 list only means you are more likely to
| scam people out of money than make it:
|
| > The Forbes 30 Under 30 have collectively raised $5.3B in
| funding. They've also been arrested for frauds and scams worth
| over $18.5B. Incredible track record.
|
| Some of the more notable: Martin Shkreli, Elizabeth Holmes,
| Charlie Javice, SBF, Caroline Ellison, Nate Paul.
|
| Fun fact, filter for Stanford in those numbers and the
| disparity grows starker still.
| rozap wrote:
| The forbes 30 under 30 to prison pipeline needs to be studied.
| Esophagus4 wrote:
| I'm thinking a "Wharton <-> Prison <-> 30 Under 30" Venn
| diagram would have a decent sized center.
| dgfitz wrote:
| Stanford actually, but yeah.
| whimsicalism wrote:
| > In seeking a 12-year prison sentence for Javice, prosecutors
| cited a 2022 text Javice sent to a colleague in which she called
| it "ridiculous" that Holmes got over 11 years in prison.
|
| This seems utterly irrelevant to the sentencing, but what do I
| know.
| tptacek wrote:
| Goes to remorse.
| Aurornis wrote:
| Sentencing can be impacted by several factors like this. If the
| criminal shows a blatant disregard for the law and views
| lawbreaking as a risk-reward tradeoff to get what they want,
| they're more likely to commit crimes in the future.
|
| If there had been more evidence that she reluctantly went with
| the scheme under desperation or pressure and held immense
| regret and remorse, in theory that would suggest a shorter
| sentence.
|
| If I recall correctly, Elizabeth Holmes' lawyers tried to push
| the angle that she was pressured into committing the frauds as
| a way to lower the temperature of the case.
| wkoszek wrote:
| It'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*$175 wired on 1yr
| cliff, and then the rest over 4 years if some milestones are hit?
| The whole thing looks weird.
| Aurornis wrote:
| > 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 number. 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.
|
| But JPMorgan's failures don't excuse the criminal actions. If
| someone enters your house and steals your computer, it doesn't
| matter if you negligently left the door unlocked. A crime is a
| crime.
| NickC25 wrote:
| >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.
| Aurornis wrote:
| > 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.
|
| Right, because it's easy to share your customer list when
| you have a small number of customers and they are repeat
| customers.
|
| Her company helped with student loans. Her customers were
| mostly one-time customers. The customer count was supposed
| to be indicative of how many new college students they
| could expect to sign up each year.
| jedimastert wrote:
| Oh don't worry, the judge absolutely LIT UP JPMorgan in the
| judgement. This is only a taste
|
| > Still, the judge criticized the bank, saying "they have a lot
| to blame themselves" for after failing to do adequate due
| diligence. He quickly added, though, that he was "punishing her
| conduct and not JPMorgan's stupidity."
| qingcharles wrote:
| I think there is so many factors involved. I've been in ones
| where they are cutting the check before the elevator pitch has
| finished. If the founders are rock stars with prior receipts,
| then that DD goes out of the window. Especially if there is
| likely to be a ton of competition.
| code4tee wrote:
| I see the string of "30 Under 30" being a statistically valid
| predictor of future likelihood to go to prison continues. These
| lists feed on the narcissistic tendencies of grifters who are
| desperate to get on the list and then tell you about it on
| LinkedIn.
|
| These lists have such a bad reputation these days that legit top
| folks are asking their PR people to keep the off!
| code4tee wrote:
| Another "30 under 30" grifter goes to jail.
|
| Separately, I hope a few folks at JPMC got fired over this. Even
| the most basic of due diligence should have caught this.
| drcongo wrote:
| Has anyoine from JPMC gone to prison for 2008 yet?
| SpicyLemonZest wrote:
| A number of people from JPMC have gone to prison for financial
| crimes in general, including some (e.g.
| https://www.justice.gov/archives/opa/pr/former-jp-morgan-
| tra...) which occurred during 2008. Nobody from JPMC has gone
| to prison for causing the 2008 financial crisis because there's
| no evidence that someone from JPMC caused the 2008 financial
| crisis.
| geor9e wrote:
| I wonder what really happened here:
|
| "The judge said Javice had assembled a "very powerful list" of
| her charitable acts, which included organizing soup kitchens for
| the homeless when she was 7 years old and designing career
| programs for formerly incarcerated women."
|
| At least for all my classmates doing the college application
| process, claims like that were almost always wild exaggerations
| of what we really did.
| masfuerte wrote:
| It seems like the effect of these college requirements is to
| teach ambitious young Americans that the way to get ahead is to
| cheat.
| wat10000 wrote:
| It's a valuable lesson.
| qingcharles wrote:
| They need to spend more time on the "not getting caught"
| chapter, I guess.
| ryandrake wrote:
| Unfortunately, it's an arms race of cheating. Everyone else
| was the president of 5 school clubs, volunteered at a soup
| kitchen and animal shelter for 2 years, tutored disadvantaged
| kids for 4 hours a day, was a varsity athlete in 3 sports,
| played the trombone in band, and won 10 academic awards... so
| everyone has to say that in order to at least seem like an
| average candidate to college admissions.
| ChrisMarshallNY wrote:
| I dropped out and got my GED. I don't think there's one
| thing in my K-12 transcripts that would look good.
|
| I was not exactly a valedictorian-level student.
|
| Done a bunch of stuff, since then, but it's not right to
| throw onto LinkedIn. It's the kind of stuff we don't take
| credit for.
| piker wrote:
| > designing career programs for formerly incarcerated women.
|
| Gonna come in handy!
| SapporoChris wrote:
| Is it correct that Charlie Javice is keeping the majority of the
| profits she made from the sale of Frank?
|
| If so, it's quite possible she considers the profit well worth
| the penalty.
| tptacek wrote:
| No. She's required to make restitution far in excess of the
| total proceeds of the sale, including as a minor component a
| sum that captures her own personal proceeds.
| SapporoChris wrote:
| Ah, thank you. I found the details here.
|
| https://www.justice.gov/usao-sdny/pr/startup-ceo-charlie-
| jav...
|
| "Javice perpetrated a $175 million fraud--repeatedly lying
| about the success of her startup company and even hiring a
| data scientist to create fake data to back up her lies. For
| that, Javice has been sentenced to 85 months' imprisonment
| and ordered to pay over $300,000,000,"
| qingcharles wrote:
| I don't know how they run that in federal prisons, but in
| some states they'll just put that balance on your
| commissary account, so you'd go to buy some noodles and
| you'd be -$300m before you start.
| sally_glance wrote:
| Maybe JP did actually smell something during DD but decided
| to go ahead because of FOMO and confidence that they could
| just sue later if their concerns turned out to be true...
| onlyrealcuzzo wrote:
| It's interesting to me that fraud appears to be a crime again,
| with Theranos and now this, when it was going on for so long and
| so obviously, and no one seemed to care when people were lying
| and frauding as long as it went on long enough for them to make a
| profit.
| cheema33 wrote:
| This lady could say that she was a victim of Biden justice
| dept. Say good things about Trump and follow it up with a large
| donation to Trump. That ought to be enough to get a pardon.
|
| This is exactly what the convicted fraudster Trevor Milton,
| founder of Nikola Motors did, to get a pardon.
|
| When signing the pardon, Trump said that he doesn't know
| anything about Trevor but heard that he likes Trump.
| joshmn wrote:
| Former federal inmate here who was recently released from prison
| a month ago today (I did 18 months): The big deal here was the
| loss amount, which can be construed any number of ways whether we
| like it or not. This will jack up the points and tilt the scale
| for the sentencing guidelines, and believe me they are archaic.
|
| After all is said and done, Charlie Javice will be hanging out at
| a prison camp--probably down there with Holmes and Maxwell,
| because it's cushy--and do no more than 4 years on the 7 assuming
| she completes all her programming requirements.
| 64d032fe wrote:
| Reading about you a bit. Would you say I shouldn't go and try
| to create the replacement for Streameast?
| electroglyph wrote:
| did u transition out in corecivic?
| greenavocado wrote:
| Does anybody have the number for how much she will likely make
| off with ultimately ten years from now once everything settles?
| verteu wrote:
| I don't think she gets to keep the money - the prosecution
| claims she'll be "forced to pay over $300,000,000" in
| restitution.
| greenavocado wrote:
| Ignoring this posturing from the prosecution, what is the
| precedent?
| ashu1461 wrote:
| What decides if a founder will get convicted or walk free like
| Adam Neumann did / Builder.ai guys did ?
| tamimio wrote:
| Connections.
| AirMax98 wrote:
| And make sure you steal from the right people.
| tamimio wrote:
| Banks scamming people is fine and legal, but don't you dare to
| scam banks, know your limits, peasant!!
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