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Founder who sold to JP Morgan for $175M allegedly fabricated 4M accounts

adeleine 4y ago
I just spent 30 seconds rejecting cookies only to be hit by a paywall, classy. https://archive.ph/QN4VN https://archive.ph/QN4VN
pigtailgirl 4y ago
-- worked for a startup that fabricated 80% of users - raised 3 million - i couldnt figure out why even though user growth was insane - support requests low - product was always broken - no product feedback etc - after 8 months - i dumped the emails of the users manually - full of skfljir@sdlfjd.rlkwjr - literally - many "emails" were just not even tlds - just junk - confronted the founder - was fired - told the investors - they shrugged - said hope he can find product market fit - strangest experience of my career -- JPM legal claim: https://s3.documentcloud.org/documents/23570243/frank_suit.pdf https://s3.documentcloud.org/documents/23570243/frank_suit.p... - said they had 4.25 million users to sell it - then 4.265 million accounts generated - guess they actually had 250k accounts - yikes -- "The Frank engineer was not persuaded and declined to participate in the scheme, and instead said that he only would provide Javice with Frank’s actual list of customer accounts: fewer than 300,000 customer accounts as of July 31, 2021. "
- jrochkind1 4y ago
  > told the investors - they shrugged - said hope he can find product market fit Makes me think that investors are often kind of in on it too. Like in crypto, they know it's all smoke and mirrors, just hope that it can hold on long enough to find a bigger sucker.
- godzillabrennus 4y ago
  I know of a startup that bought another startup using an investment bank. The startup that was the acquiring entity later had the CEO charged with crimes related to a previous company they had founded and were CEO of many years ago. Media scrutiny kicked in on their then current venture the acquiring company and it turned out the company they bought had never conducted any business whatsoever with the clients they had publicly and repeatedly touted. When the acquiring company CEO took a plea deal and admitted to the crimes of their past they got leniency from the feds for their frauds. They didn’t serve a day in jail. They admitted they stole eight figures from their investors. Not one investor filed a lawsuit against them. I’ll never understand that.
- raincom 4y ago
  That's how spammers operate--creating domains on the fly. Many spammers own registries in disguise; that way, everything can be automated.
- dx034 4y ago
  I like that the engineer refused to do the job. The founder managed to get someone else to do it, but refreshing to see engineers stand up to bad business practices.
  - csomar 4y ago
    There is legal liability with this (which can potentially include jail) with no upside (you don't get the upside in equity, just keep the shitty job). I'm surprised if there is an engineer who will comply.
    - dx034 4y ago
      Many would. If you're not rich enough to be able to afford being jobless, risking getting fired over a simple task is a very hard decision to make.
      - csomar 4y ago
        Then you must be a really bad engineer (both from being afraid to be jobless + from doing really bad math).
        ohyes 4y ago
        People have different experiences with poverty. So, while I agree the risk assessment is bad, competent people do stupid things for bad reasons because of their personal history all the time
reiichiroh 4y ago
Sounds like what Nikola Motors did
- danrocks 4y ago
  She put a bunch of students at the top of a hill and let them roll down? /s
tushar-r 4y ago
>Alex Spiro, Javice’s legal representation, did not reply to Fortune’s request for comment, but has denied the allegations against her to other news outlets. Javice sued JP Morgan in December alleging the bank used an investigation into Frank as an excuse to fire her from her job with the company, Bloomberg reported. Spiro told the outlet that the bank’s lawsuit was “nothing but a cover.” Fortune was not able to reach representation for Amar. Interesting to see the person who is defending Elon being retained by this founder!
jaclaz 4y ago
Not at all my field of experience (nor any of my business), but wouldn't such a thing come out during "due diligence", long before the company was bought?
- danrocks 4y ago
  She dodged this using some hand waving about student data being private customer data so she couldn’t share it with the bank.
  - jaclaz 4y ago
    I see, but the bank accepted the hand waving, once said that clearly there is some form of fraud committed, it seems to me that JP Morgan was gullible enough to fall for it. I have no idea on how such a business deal is agreed upon specifically, but if - as it seems to me reading the article - JP Morgan essentially wanted to buy users (in a given niche) it seems weird that they didn't find a way to check that these users existed.
    - ufo 4y ago
      Apparently the arrangement involved a 3rd party to do the due diligence and they were the ones that got duped.
syspec 4y ago
https://archive.ph/QN4VN https://archive.ph/QN4VN

I just spent 30 seconds rejecting cookies only to be hit by a paywall, classy. https://archive.ph/QN4VN https://archive.ph/QN4VN

pigtailgirl 4y ago

-- worked for a startup that fabricated 80% of users - raised 3 million - i couldnt figure out why even though user growth was insane - support requests low - product was always broken - no product feedback etc - after 8 months - i dumped the emails of the users manually - full of skfljir@sdlfjd.rlkwjr - literally - many "emails" were just not even tlds - just junk - confronted the founder - was fired - told the investors - they shrugged - said hope he can find product market fit - strangest experience of my career -- JPM legal claim: https://s3.documentcloud.org/documents/23570243/frank_suit.pdf https://s3.documentcloud.org/documents/23570243/frank_suit.p... - said they had 4.25 million users to sell it - then 4.265 million accounts generated - guess they actually had 250k accounts - yikes -- "The Frank engineer was not persuaded and declined to participate in the scheme, and instead said that he only would provide Javice with Frank’s actual list of customer accounts: fewer than 300,000 customer accounts as of July 31, 2021. "

jrochkind1 4y ago
> told the investors - they shrugged - said hope he can find product market fit Makes me think that investors are often kind of in on it too. Like in crypto, they know it's all smoke and mirrors, just hope that it can hold on long enough to find a bigger sucker.
godzillabrennus 4y ago
I know of a startup that bought another startup using an investment bank. The startup that was the acquiring entity later had the CEO charged with crimes related to a previous company they had founded and were CEO of many years ago. Media scrutiny kicked in on their then current venture the acquiring company and it turned out the company they bought had never conducted any business whatsoever with the clients they had publicly and repeatedly touted. When the acquiring company CEO took a plea deal and admitted to the crimes of their past they got leniency from the feds for their frauds. They didn’t serve a day in jail. They admitted they stole eight figures from their investors. Not one investor filed a lawsuit against them. I’ll never understand that.
raincom 4y ago
That's how spammers operate--creating domains on the fly. Many spammers own registries in disguise; that way, everything can be automated.
dx034 4y ago
I like that the engineer refused to do the job. The founder managed to get someone else to do it, but refreshing to see engineers stand up to bad business practices.
- csomar 4y ago
  There is legal liability with this (which can potentially include jail) with no upside (you don't get the upside in equity, just keep the shitty job). I'm surprised if there is an engineer who will comply.
  - dx034 4y ago
    Many would. If you're not rich enough to be able to afford being jobless, risking getting fired over a simple task is a very hard decision to make.
    - csomar 4y ago
      Then you must be a really bad engineer (both from being afraid to be jobless + from doing really bad math).
      - ohyes 4y ago
        People have different experiences with poverty. So, while I agree the risk assessment is bad, competent people do stupid things for bad reasons because of their personal history all the time

reiichiroh 4y ago

Sounds like what Nikola Motors did

danrocks 4y ago
She put a bunch of students at the top of a hill and let them roll down? /s

tushar-r 4y ago

>Alex Spiro, Javice’s legal representation, did not reply to Fortune’s request for comment, but has denied the allegations against her to other news outlets. Javice sued JP Morgan in December alleging the bank used an investigation into Frank as an excuse to fire her from her job with the company, Bloomberg reported. Spiro told the outlet that the bank’s lawsuit was “nothing but a cover.” Fortune was not able to reach representation for Amar. Interesting to see the person who is defending Elon being retained by this founder!

jaclaz 4y ago

Not at all my field of experience (nor any of my business), but wouldn't such a thing come out during "due diligence", long before the company was bought?

danrocks 4y ago
She dodged this using some hand waving about student data being private customer data so she couldn’t share it with the bank.
- jaclaz 4y ago
  I see, but the bank accepted the hand waving, once said that clearly there is some form of fraud committed, it seems to me that JP Morgan was gullible enough to fall for it. I have no idea on how such a business deal is agreed upon specifically, but if - as it seems to me reading the article - JP Morgan essentially wanted to buy users (in a given niche) it seems weird that they didn't find a way to check that these users existed.
  - ufo 4y ago
    Apparently the arrangement involved a 3rd party to do the due diligence and they were the ones that got duped.

syspec 4y ago

https://archive.ph/QN4VN https://archive.ph/QN4VN