3 ms·

I know nothing about finance but I'd love to understand how such a scheme can fool inverstors. At the end of the day cashInBank==investment+sales-costs. How ca

• jldugger 5y ago
  You can put down whatever number you want for all of the variables in your formula. It's the auditor's job to make sure that a) they add up and b) they are correct.
• irjustin 5y ago
  Balance sheets can be cooked. You need to compare against bank statements that you received from the bank and not the companyWhich again could be cooked.
• theptip 5y ago
  I think the general idea is that outright fraud like this is highly likely to get caught eventually, and leads to jail time, meaning it’s quite uncommon for otherwise smart people to make such idiotic moves. In other words it’s just not a big source of losses in the VC industry and so you don’t need to spend much effort guarding against it. (Especially considering that VCs expect most of their investments to fail for some reason or other.)