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JPMorgan Scammed by Startup That Lied About Its User Base

4 points by qwertyuiop_ 4y ago

NickC25 4y ago
How is it that a bank filled with very smart, well paid people failed to do proper due diligence before investing in a company? I mean, I get that institutions are tripping over themselves to invest in Minority-founded/led startups, and there's nothing wrong with that. But that's AFTER you've done the due diligence and made sure there's a degree of legitimacy there....otherwise, what's the point? Just sad that the banks (which tend to hire the best and brightest out of the top schools) made themselves look dumb. This in particular is a bank that has over 3 trillion dollars on its books....can't be making mistakes like that, even if the total $$$ amount invested is a rounding error to them.
- sn0w_crash 4y ago
  You answered your own question. The top down pressure to invest in minority-led is immense. Doing too much due diligence on Frank might be characterized by some as being skeptical of a minority-led company. Couple that with the FOMO culture of 2021 and you have a recipe for minimal DD and maximum deal speed.
  - NickC25 4y ago
    Valid point and I completely understand in this day and age that the pressure to invest and help develop minority led or owned companies is massive - but even then, I expect a multi trillion dollar bank to be quite professional in their approach to investing in anything, including startups. The bank has a fiduciary duty to it's account holders and share holders. Spending a bit more time and effort to make sure it doesn't loose money investing into a fraudulent operation is something it is legally obligated to do. Instead, the bank apparently chose to ignore red flags until the deal was already completed. As a shareholder AND account holder, I am flabbergasted that the bank just decided to piss away any money at all on such a deal. Banks are supposed to be skeptical - that's sort of the whole point of banking. You don't just go and get a loan by asking nicely, you get a loan after the bank thoroughly investigates your work, your finances, etc...because they're on the hook to get a return on that loan.

4 points by qwertyuiop_ 4y ago

How is it that a bank filled with very smart, well paid people failed to do proper due diligence before investing in a company? I mean, I get that institutions are tripping over themselves to invest in Minority-founded/led startups, and there's nothing wrong with that. But that's AFTER you've done the due diligence and made sure there's a degree of legitimacy there....otherwise, what's the point? Just sad that the banks (which tend to hire the best and brightest out of the top schools) made themselves look dumb. This in particular is a bank that has over 3 trillion dollars on its books....can't be making mistakes like that, even if the total $$$ amount invested is a rounding error to them.

sn0w_crash 4y ago
You answered your own question. The top down pressure to invest in minority-led is immense. Doing too much due diligence on Frank might be characterized by some as being skeptical of a minority-led company. Couple that with the FOMO culture of 2021 and you have a recipe for minimal DD and maximum deal speed.
- NickC25 4y ago
  Valid point and I completely understand in this day and age that the pressure to invest and help develop minority led or owned companies is massive - but even then, I expect a multi trillion dollar bank to be quite professional in their approach to investing in anything, including startups. The bank has a fiduciary duty to it's account holders and share holders. Spending a bit more time and effort to make sure it doesn't loose money investing into a fraudulent operation is something it is legally obligated to do. Instead, the bank apparently chose to ignore red flags until the deal was already completed. As a shareholder AND account holder, I am flabbergasted that the bank just decided to piss away any money at all on such a deal. Banks are supposed to be skeptical - that's sort of the whole point of banking. You don't just go and get a loan by asking nicely, you get a loan after the bank thoroughly investigates your work, your finances, etc...because they're on the hook to get a return on that loan.