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.
> 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
I don't mind that outcome. She did not knowingly sell a product that could harm the public or abuse and traffic children, so it wouldn't be unfair or a travesty of justice like with those other two (especially that last one)
I'm not sure I like the incentives that creates, though. If this is the precedent, then if you're committing financial fraud already you might as well go as big as possible, since there appears to be a cap on punishment.
I mean from mine, and im sure many other people's view, that is already mostly true. Her biggest mistake to me seems like messing with a big dog, rather than screwing over little guys that don't have millions to throw at the courts or teams of full time lawyers. If JPMorgan defrauded the same amount of money from a bunch of regular joes I doubt anybody would be in jail or even that any potential fees would come anywhere to matching the amount of money defrauded.
ah yes, so clearly we must make sure that they are even less enforced. what could go wrong? hell, Enron lost investors-- bunch of billionaire fat cats, the lot of 'em-- $75 billion... they shoulda made Kenneth Lay Chairman of the Fed! or i guess maybe he his net worth had one too many zeroes to be sympathetic... hell, Kawhi Leonhard and his uncle blatantly and deliberately broke all of the NBA salary cap rules in the way that an undercover cop asks everyone they come across if they can buy weed from them, but the Clippers are owned by Steve Ballmer, so it's apparently okay. we hate the player because of the game in everything except for sports lmao.
> Strong anti fraud rules (even for massive banks) are a foundational part of a high functioning society.
Sometimes it seems we're missing most of the "foundational part[s] of a high functioning society" except the ones that serve elites (which then are so sacred *and must never be questioned).
Eventually people stop caring about the elite's protections, even if that breakdown is ultimately harmful. It's like the murder of that United Healthcare CEO. His company ground down the common man's benefits in a way that probably killed thousands (at least), but we're supposed to cry for him. Betray people long enough, and they're no longer interested in holding up their side of the bargain.
If they want a high functioning society, the elites need to work harder at holding up their end of the bargain.
I'm unconvinced. Banks wield massive political power through their capital, and so get away with highway robbery all the time. 2008 financial crisis comes to mind. It seems to me that the rules are one sided and so it seems this "foundational part" of high functioning society is just guarding the highwaymen with the cityguard, when the swords should be facing the other direction.
The banks at the center of the 2008 crisis are largely international. Is your question about the entire western international finance system and all societies comprising it?
Anti fraud rules sending people to jail are what we're discussing, and the proposition that they're necessary for a high functioning society. If we have these rules, and society is not high functioning, then, it seems you and I agree, that they're not necessary for a high functioning society.
> Minimum security institutions, also known as Federal Prison Camps (FPCs), have dormitory housing, a relatively low staff-to-inmate ratio, and limited or no perimeter fencing. These institutions are work- and program-oriented.
The Elizabeth Holmes Wiki page says she is staying here: Federal Prison Camp, Bryan (Texas).
> FPC Bryan along with FPC Lewisburg and FPC Lompoc have the lowest security rating of all the federal institutions, other than community corrections centers as those are known as halfway houses. Due to the low classification, most of these facilities have no fence and a low staff-to-inmate ratio.
No fence!
Oh, it looks like Ghislaine Maxwell (of Jeffrey Epstein fame/infamy) is also staying there.
McMillan was involved in a group of three purchasing around a pound of meth. Yurchik was involved in a ring of 27 people in multiple states moving kilogram quantities over the course of two years: https://www.kxxv.com/news/local-news/central-texans-among-21...
The group also actively laundered its earnings though only half a dozen or so were charged for that. The feds seized seventy-two kg of meth from them, more than one hundred fifty times what this other lady was involved with, a kg of cocaine, a bunch of money, and more than a dozen firearms. These were not cases of radically unequal charging.
I don't know why you picked these two people but I get a little tired of folks presenting such a skewed view of any and everything to come up with "prison bad, judge bad, sentence bad".
Lawyers don't have much to do with this part of the process. Adults-in-custody have a points system that reflects where they fall on the ladder as far as custody level goes. More in Program Statement 5100: https://www.bop.gov/policy/progstat/5100_008cn.pdf
Lawyers have a huge impact on how the case (and defendant!)
is presented, what is and is not considered in the trial or plea, what plea the person gets - or if they get one at all, etc.
> Yurchick was one of 21 people that had been indicted for conspiracy to possess with intent to distribute kilogram quantities of methamphetamine in Texas and elsewhere from August 2019 to March 2021 … Yurchick subsequently pleaded guilty to that charge on February 1, 2022
I would pay to boss around country club criminals in chicken suits like Ghislaine Maxwell and Donald Trump over the internet, in the name of rehabilitation.
Well, have you seen "maximum" security prisons in Norway and Finland? It is really something else. You can find videos on YouTube about it. It looks like a summer camp. Of course, they have high social goals to reintegrate these people into regular society when their sentence is complete.
I got picked up by my partner, thankfully. I was a self-surrender too.
I did hear that they yanked out all the valuable assets from Cimarron (OKC's out-of-custody transfer facility) and now all the doors are manually keyed, amongst other things.
the reduction of time works out well for shorter sentences, but for longer sentences, you will have to serve at least close to the 85% . If you know you will be guilty, you can void bail and work on your sentence early so you get some time served.
I’m curious your relation to the BOP—there are all but a few of us here. My email is in my profile if you’d care to share.
The FSA and SCA do wonders for shorter sentences indeed. The recent push (at least on paper) for more timely transitions to community custody is welcomed and very overdue.
Sentence length is hard to stomach when you experience first hand how it all but strips people of their future. People get 10 years in the US that would be no more than 1 anywhere else, and then society expects them to come out rehabilitated and ready to contribute to society starting from, most commonly, zero.
Halfway houses don’t fix that. Home confinement doesn’t fix that. I’m lucky to have a highly marketable skill and a high degree of ability which makes my experience different than most.
I ask myself all the time how it gets fixed. In this society, I don’t think there’s a chance.
> It’s hard to take your views on sentencing seriously
I have no idea why he had to surrender a year and a half of his life to a notoriously dangerous "correctional" institution for redistributing television streams. For profit or not. I think his incarceration represents an abuse of the system to protect sports monopolies. I genuinely wonder if it wasn't cruel and unusual.
No offense but he clearly wasn't some elite hax0r with the capability of bringing significant portions of American infrastructure to it's knees for the purposes of harming the public at large.
Professional sports league games are the output of the efforts of thousands of people and billions of dollars of capital. The right to distribute video of those games are the largest part of how those leagues make money, as arranged by contracts and underpinned by intellectual property law.
This is not a case of "you're just bottling tap water". There is tremendous value created by these leagues as represented by their revenues. It is totally absurd to me that someone can believe stealing that intellectual property at scale is not a crime. It is no different than stealing a laptop. In fact, it's worse! The ease by which the scale of the theft can amplified is like stealing thousands of laptops. Do you believe stealing laptops and selling them is criminal?
It is not. If I can copy your laptop: You still have a laptop. I also have one now. So it's actually the opposite of worse. It's not nearly as bad.
> Do you believe stealing laptops and selling them is criminal?
Do you still have a laptop? Then why should I be punished in a jail cell? If you want to settle for cash, we can talk, but if you intend on threatening my life over copies then you have lost the plot.
We likely won't agree on this. I think you're wrong and theft should absolutely be criminal, and theft of certain magnitude should result in prison time.
But, he wasn't sent to prison just for the theft and distribution. He also "illegally intruded into MLB computer networks" and then "engaged in an attempt to extort approximately $150,000 from MLB ".
He plead guilty to all of this. You think all of that should just be settled via lawsuit, too?
Well.. as you yourself said: they're a billion dollar company. I expect them to secure their own infrastructure better. One guy with spare time working from home bested them? The FBI is not there to cover corporate negligence.
> He plead guilty to all of this.
Then he almost certainly would have settled very quickly in a civil case.
> You think all of that should just be settled via lawsuit, too?
Yes. It's the appropriate remedy. It's the fastest and most direct path to justice for the harmed entity.
If you're still so thirsty for blood then ask yourself if simple probation with agreed restrictions wouldn't have brought about the same outcome. Would the NFL and MLB have felt just as "protected" with this simple jurisprudence?
No. I mean that there was a full submission on him on HN front page this morning, that later was flagged out of concern, because he has in fact a probation officer that should maybe not see this.
>> 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.
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.
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.
> 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.
I’m sure that that one line manager who reported the fraud to the CEO was well rewarded. How he learned what he did? We’ll never know. Too bad his team had to be let go.
> 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.
What did you find? Low bitrates? Smaller resolutions? Enquiring minds want to know.
I mean, that would work. It's going to be the reason AI video compression works; people are okay with an AI model being 1GB but they wouldn't put up with libavcodec being 1GB.
It's a valid codec move to have 1GB in the codec but to be able to compress arbitrary video with it, or even just arbitrary video within a certain specialized domain. Having those requirements will affect all the cost/benefit decisions that get made when people decide whether to use it, but if it outperforms on other metrics it may be something that wins in some places.
I believe lumost is referring to the actual video being used for testing being embedded in the codec. That is not a valid move; it compresses just that one exact video arbitrarily small (honestly anything above zero bytes is just sandbagging, you can always map the empty file to your test video, for INFINITE COMPRESSIONS!!!1!) but nothing else.
>> people are okay with an AI model being 1GB but they wouldn't put up with libavcodec being 1GB.
If people are happy with the results of the libavcodec, you could rebrand it as "libavcodec-ai" and now you have a more effective codec that might be bigger, but is now palatable to users :-)
Between this and the other compression scams mentioned in the thread, is there any connection to the show Silicon Valley? I haven’t heard of this genre of scam before but it sounds a lot like the premise of pied piper!
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".
I've occasionally been asked by an investor to do DD on some inventor's idea. Whenever it's an obvious scam I turn down the job. If I tell the truth and say it's a scam, the "inventor" will sue me. If I lie and say the technology has promise, the investor will sue me when he loses his investment.
>> I've occasionally been asked by an investor to do DD on some inventor's idea. Whenever it's an obvious scam I turn down the job. If I tell the truth and say it's a scam, the "inventor" will sue me. If I lie and say the technology has promise, the investor will sue me when he loses his investment.
Wouldnt the non-confrontational approach here be to agree with everyone on a benchmark, build up the benchmark, and showcase results?
Probably. The problem is that scammers are very clever with demos e.g. there's always a battery hidden inside the free energy device and they won't let you take it apart. One can work around such obstacles with very carefully designed tests, but then the scammer makes up some excuse not to agree to those conditions so you have to go back and forth and it becomes so expensive to do the DD exercise that the investor cancels the project.
Some people might be able to make this kind of business work but I don't have the patience or the political skills for it.
He's a windbag. I never understood how they could even think of making him head of Philips. And to this day he claims that Sloot's box worked. The group I worked for was a bunch of wealthy Dutch guys, several of whom ended up defrauding other investors. Great little world...
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.
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.".
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.
A variation on this would work, but alas we don't have the math tools as yet.
The idea (not mine) is that you can think of data as "very large numbers". So a 4096 bit number is just a big number.
Well, we have a short way to generate big numbers. x^y.
So given a big number (say 800 000 bits) we could generate a (Hopefully short) expression of the form a^b + (or minus) c^d + ... etc.
Unfortunately the "factorizing" (and indeed ecpansion) of a large number in this way can't (currently) be done quickly.
But in concept enormously large binary files could be compressed to tiny strings.
It would not work for arbitrary inputs. See the pigeonhole principal: you can’t represent all possible n-bit values with fewer than n bits, because otherwise you’d have at least one case where multiple input values map to the same output value. On decompression, which one do you go with?
And if that’s not convincing, then consider that any perfect compression scheme would be able to compress its own output even smaller, until you end up with a single bit output for any possible input.
So no, that wouldn’t work in general. Some specific values may compress well, but most others can’t. It’s not a matter of difficulty of finding the right answers, as much as you probably can’t do it.
To add to this, useful compression algorithms exploit patterns in the input data. A common pattern to target is repetition, since most files contain lots of repeated byte sequences.
The pattern that factorization targets are numbers that factor well. I doubt this is a pattern you’d find in any file worth compressing, it doesn’t have a clear relationship to file data.
Aside from the factorizing cost, I suspect decompression will also be prohibitively slow. Exponentiation, multiplication and addition such large range numbers could still end up prohibitively expensive.
In addition to the performance problems there's the basic fact that no such scheme can possibly work (as proven by the pigeonhole principle).
High compression rate schemes that actually work compress high likelihood inputs and expand low likelihood inputs by accounting for the characteristics that make inputs high likelihood--e.g., redundant highly patterned texts. Schemes that are agnostic about the input, like the one described here, are as likely to expand any given input as they are to compress it.
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…
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.
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.
> 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.
Using a low hurdle to show it still failing is a good rhetorical technique, but you lowered your hurdle too far here. Yes technically specifying the order of 6000 segments takes more than 8KB. Because it takes 8.14KB. That's a rounding error. What could have been a useful argument is now a nitpick. And what if the movie was only 98 minutes, now it fits? What a mixed message.
It's a good reference point, but I'd replace "is not even enough" with "would only be enough".
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.
If I hadn't seen something like this myself I would never believe it. In the late 90s I worked at a very large tech company, for the CTO. The company was considering investing in a startup that claimed to be able to transmit fiber-like data rates on high voltage transmission lines, somehow by using microwave. I was asked to comment on this. Within a few seconds I said it had to be a scam per Shannon, and at any rate said high voltage lines typically already have fiber on the ground wire at the top of the towers. The company went ahead with the investment.
I think I remember this, or a similar scam around the same time. What stood out to me is that one of the big six was hired to certify the legitimacy of the "black box", despite the obvious mathematical impossibility. I'm trying to find the firm ... Hm, according to Google AI it was Ernst and Young (I did a search for Ernst certifies compression technology 1990s). They apparently did two different "audits or demonstrations.
I was working at Andersen Consulting at the time, offshoot of Arthur Andersen. The Arthur Andersen that signed off on Enron (AC had before then become Accenture and separated from the audit partnership).
I chuckled to myself a few years later when the NBA draft lottery was signed off on/audited/witnessed by another Big6 firm. Yeah, give them enough money and they'll "audit" anything within some degree of plausible deniability.
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.
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.)
> 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.)
> 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.
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.
> 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.
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.
> 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.
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.
FWIW, around 1/3 of the 55 were customer support. That's not a lot of support per user, but it's not none. And it is enough to get lots of feedback to engineering about things users are having trouble with, because the better you make the product, the less overloaded customer support is.
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.
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.
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.
> they are now vulnerable to scams and you are not.
if the scam is not going to hurt the agent (in this case, the CEO responsible for the buy out), and the success is going to reward the agent, then the incentives are not completely aligned between the agent and the principle.
So signing the deal with less due diligence, then correcting it later (if needed) seems more profitable to the agent, while the principle takes all of the losses (if any).
>> 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!
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.
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.
Is it just me, but doesn't it seem like the concept of Frank as a business just sounds like it wouldn't have lived that long and that it might even be predatory? Frank got in trouble with the Department of Education because they used the term "FAFSA" in their domain name. I was lucky enough to have mentors in my life who warned me away from clicking on sponsored links to paid preparers if I ever decided to Google search "FAFSA". So it makes me suspect like part of their business strategy was to convince low-income students who have great difficulty submitting the FAFSA to pay them to submit it for them. I don't recall what the environment was like years ago, but there had always been a desire on the part of ED to make the FAFSA easier to fill out, and this would have totally eroded the value of Frank even if it was a legitimate business. What's also confusing is that at some point they apparently had a `.org` domain, so maybe they were also a non-profit?
Apparently they also had some kind of service to submit an aid appeal letter to the student's financial aid office. This is also a ridiculous service for low-income students to pay for because I can almost guarantee that Frank wouldn't have the context necessary to actually convince a college's financial aid administrators to give more money to one of their users.
It's almost as if the people considering the deal might have been focusing more on the financial education aspects of Frank instead of how they actually would interface with the FAFSA.
As I mentioned a bit further down, the blind spot here is they really only cared about the user list. The product itself was immaterial, so they might have overlooked or simply not cared about some of the shadier tactics to acquire it.
Agreed. FAFSA is a bit tedious to fill out but it’s not difficult. No need to pay someone to do it. They’re just going to have to ask you for all the same information anyway.
> 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.
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.
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?
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
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”
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.
>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.
She never had the full proceeds in her possession. Remember, she had investors. She was venture-backed startup. She likely only had somewhere between 10% and 25% of the equity at the time that she sold the company.
>> She never had the full proceeds in her possession. Remember, she had investors. She was venture-backed startup. She likely only had somewhere between 10% and 25% of the equity at the time that she sold the company.
How does this work for the VCs? Does JPMorgan claw back money from the VCs? What if the VCs distributed to their LPs...does money get clawed back from the LPs?
I dont think they had to lie to Yahoo to do it though. Everyone believed in the froth of dot-com and plenty of dumb money just there for the taking from the likes of Yahoo. Kinda like today with all the AI froth.
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.
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.
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.
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.
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.
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.
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
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.
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".
This. Why bother going through DD properly if you can just sue the seller later if it turns out everything isn't what you expected?
I get that this is about the seller lying during the sale process, which is appropriate imho, you shouldn't be able to just lie about stuff like this. But it's the DD team's job to spot this stuff, that's what DD is all about. I notice the judge criticised the bank as well, which is a step in the right direction.
I've been part of due diligence from both sides of the table both in investment situations and cases of M&A activity. You're not really set up to detect out and out fraud like this. For one thing there might be a limited subset of data you really have access to (eg in this type of situation they may not have been in a position to see all the row level customer records before signing because they were competing for business in those customer segments so it is reasonable to restrict access. You might get aggregate data that looks sane and have to go on that for instance.
Secondly you may not actually have the time needed to check things out properly. There's often deadline pressure where the deal has to complete by a certain date or it triggers break clauses or some other party gets a right of refusal or whatever so often the clock runs out even if you would otherwise be able to do the analysis.
- a fraction of the board gets all gung ho on buying something
- board-1 gets marching orders to do due diligence. those people are typically aware of the sentiment in the board. they delegate to their underlings and share what they think the board wants,
- if you say no, you are guaranteed to upset one of your bosses. if you say yes, its typically a positive (your boss is happy),
- most M&As are typically bad ideas. Its typically nobody's fault when the thing is written off by the next management and nobody seems to mind that much. People who waved through the due dilligence are proper executives by then and the cycle continues.
Incentives are mis-aligned, and on top of this there is usually (a) not a lot of time and (b) a veil of secrecy. Missing those fake emails does not surprise me.
I'm not surprised. Was part of an acquisition by a large F100 company. There were some "interesting" accounting calculations that we discovered 2 years after.
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.
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.
> 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.
I'm involved with a company taking some investment from the outside. We're really just sending them copies of our documents and data.
IF someone chose to blatantly lie on that paperwork (we're not), I'm not sure how much they could spot.
In the meantime this outside group isn't querying out DB that's for sure, but even then in the example of this case, they actually generated fake user data and records.
I'm not saying you're wrong generally, but I think a lot of due diligence really does trust that someone wouldn't blatantly fake ... everything.
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.
Different burdens of proof. The fraud charges in the US were criminal in nature which required a showing of guilt beyond a reasonable doubt. The fraud in the UK arose in the course of a civil trial with a lower burden of proof (balance of probabilities).
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.
> 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.
>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.
> 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.
Right but the privacy law excuse is nonsense. All such laws (possible exception of medical data) allow for 3rd parties to be "read in" on the data for legitimate purposes. Source: worked as a consultant for companies with private data for 20 years.
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."
That’s not how it works in venture. Investors want to be rewarded immediately. There might be an earn-out, but it’s relatively minor as compared to the purchase price – maybe 10% to 25%. And just as often, it’s not an earn-out of the original purchase price – it’s an incentive to outperform on top of the purchase price.
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.
"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.
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.
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.
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.
Hindsight bias, and you're wrong by saying that the $5k were conditional on the line item change (they weren't). Here's the quote from the indictment:
> JAVICE responded to Scientist-1 that same day, “Can you send the invoice back at $18k and just one line item for data analysis?”
>
> Scientist-1 replied, “Wow. Thank you. Here is the new invoice.” Attached to this email was a new invoice, now for $18,000, with the previous specific descriptions removed and replaced by the one-line description, “Data science services”
It is very common for large companies to ask for changes to line items as it helps the finance team categorize. Also, it's clear from this conversation that the scientist believed the $5k to be a generous tip.
Even if all of that weren't the case, this should be a case of innocence until proven guilty; it's easy to see the crime in hindsight, but if you suspect nothing that thought might just not cross your mind in the first place.
You can call it hindsight bias if you want. What you seem to be saying is that your heuristics would have told you that Javice had no nefarious intent based on that exchange, and you would of course have been wrong. My heuristics are very different.
It is very obvious to me that the extra $5k was "conditional" because if Scientist-1 hadn't sent back an invoice for $18,000, he wouldn't have gotten paid $18,000.
I have never heard of a company giving a 40% "tip" after the fact to a contractor who was already billing $600/hour. It seems like Scientist-1 did not question this tip because it didn't benefit him to do so. He didn't suspect anything because he was motivated against suspicion. That's a lack of integrity.
I am sure if she could pull the wool of JP Morgan's eyes, she could convince Scientist-1 that it was legit. "I want to expense it under Marketing not R&D, which would let us pay you more. My CPA's eyes glaze over, can you uplevel it?" or something
You could imagine something like that happening, but from the email conversation quoted in the indictment, it doesn't seem like there was even a token attempt at justifying it.
To complement this, once when I was earning some money to type documents through computer and print them for many purposes (rent contracts, college homework and others), a woman asked me to fake their printed pregnant exam which was saying that her wasn't pregnant, I rejected, she insisted to print a simple "Yes" and I persisted without a sweat! I was young at the time about 14 years old.
try to search for samples of lab results (OCR dev, long story)... don't include anything about pregnancy or any keyword even close to it. and you will be shocked how the entire first page will be services selling positive pregnancy tests. I had no idea there was a market for that.
I've done consulting work a bit like this. Being asked to change the invoice: consolidate lines and change the description, is very common. If I were asked to do that I'd just do it, without questioning the reason. Being asked to do that in exchange for extra money is...very odd. Like she did something completely unnecessary that signals wrongdoing. Was she trying to get caught?
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.
Gaming a benchmark seems pretty small beer to be honest. Usually such things are presented with small print that tips off the customer, who will do their own benchmarks if they are not dumb.
Perhaps better to draw the line at things that are potentially illegal or break some obvious fiduciary duty.
Nice. Find accomplices by leveraging the power gradient of employment. Giving them legal advice to boot. Think that should add more time. It's an evil thing to do.
> 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.
> 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.
I think the difference is PG faked it until he could make it work at some future endpoint, Charlie Javice gave up on trying to make it work and instead faked it at the endpoint
> 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.
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.
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?
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.
> 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.
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.
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.
> 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.
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.
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.
> 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)
> Javice was among a number of young tech executives who vaulted to fame with supposedly disruptive or transformative companies, only to see them collapse amid questions about whether they had engaged in puffery [...]
I'm assuming the key punisher here is the "collapse" rather than the "puffery". I don't think I've seen an "honest", "unpuffed" company since the 90s when companies were still wishing their customers merry christmas over the radio.
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!
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.
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.
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.
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.
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.
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.
“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,”
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.
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...
It was a service that aided in filling out a well known federal form (for student loans). Similar to how there are multiple companies that sell a service to fill out (prepare) federal forms for income tax.
Why are these forms so complex? The eternal question. The tax forms companies actually lobby against simplifying.
And not only does she have to pay $300M – she didn’t even get the $175M that JPM paid. A lot of that — the majority most likely — went to her investors.
> 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.
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.
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.
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.
"In 2022, JPMorgan filed a lawsuit for fraud, claiming that the data reported by Frank was largely a fabrication and
alleged that Javice paid a data science professor $18,000 for a list of more than four million fake student names to convince JPMorgan to purchase Frank."
There is a specific distribution of names of people that is very hard to fake. Think all the different first names, last names, their spellings and common names. Generating that many realistic fake names that still match the distribution of real names is hard.
So if a distribution exists and the data scientist is aware of it and knows hed need to match it within some deviation then that is pretty trivial to do in not too much time of coding and not too much runtime. If guy doesn't have that and doesn't know hes party to a fraud then its just as easy, random match first names and last names from a limited list. There's no training scenario imaginable that would be taking into account some particular name details. Guy was probably paid near 10k per hour, which I don't know, might trip me up a bit.
When I said it's "hard" I mean for the average non-technical person, or someone who doesn't have access to a real-world dataset with millions of names for comparison.
You can easily find such datasets on the dark web, FYI.
This feels like a case of both parties getting caught up in their own bullshit.
It seems unlikely that the founder was intentionally fabricating data in order to commit fraud. Far more likely is that the founder was caught up in Silicon Valley startup culture, told they were disrupting industries and changing the world, and didn't put enough into actually doing the work, and ended up thinking their company was much more important than it was. Throw in some of the toxicity of #girlboss culture (this is a criticism of the negative aspects, we do need more female founders), and you get a Dunning-Kruger situation. I can see how someone would then keep digging rather than pull out if things started to turn.
On the other side, JPMorgan obviously didn't do any real due diligence. They were too caught up in the industry hype, and want to continue their cosplay as a tech disruptor. Finding this would have taken almost no effort, there wasn't much attempt to hide it. Promoting what the company wants to be true rather than what is actually true is a clear sign of a rotten culture – people won't speak up even when there is literally no good outcome that can come from staying silent. JPMorgan got exactly what they deserved with this deal.
I feel sorry for the founder getting caught up in the cultural currents that led to this, and while they need some accountability, a prison sentence probably isn't right.
Yes it was dumb and dumber, but once you get to writing programs to fabricate user data for DD purposes, you're in the Bernie Madoff camp. He also defrauded dumb people, and various smart people concluded he had to be a criminal. Still a criminal.
The startup world is made up of grifters of all sorts that make up BS all the time. And yet, in the end it’s always the women that get spectacularly sentenced?
The only exception I can think of is SBF, but that was a quite different case.
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.
No different than ozy.com's story, and Carlos Watson got the pardon. It helped that he was basically Powell-Jobs's pet (one of the owners of the Democratic Party), then kissed Trump's ass on top. His entire deal was making connections with rich white people who wanted a black friend to tell them they were not only good people, but the best people. Excellent work if you can get it.
I don't think you can start this charm offensive after the crime, though. The only person I've ever seen manage that is Rob Blagojevich.
As has been said, the value of standing under a huge tree is more the shade, not the fruit. Your rich friends may never do anything for you, they might only value your friendship because you're one of the few who have never asked them for anything. But, consistent with that, if somebody attacks you they'll defend you as hard as they defend their other possessions. That kind of armor enables you to pluck fruit from other trees.
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.
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.
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.
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.
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.” "
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.
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
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.
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
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.
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.
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.
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.
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.
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
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?
> (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.
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.
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.
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.
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.
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."
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.
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.
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!
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.
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.
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.
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!
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.
I personally believe money crimes should have money punishments and corporal crimes could have corporal punishments. If you steal from me and go to jail how did I benefit? If you steal from me and I get a bunch of $ for pain and suffering and you get your pay docked for n years that seems good.
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.
> 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
I don't mind that outcome. She did not knowingly sell a product that could harm the public or abuse and traffic children, so it wouldn't be unfair or a travesty of justice like with those other two (especially that last one)
Agreed, hot take, but she defrauded a large corporate bank , big whoop if you ask me.
I'm not sure I like the incentives that creates, though. If this is the precedent, then if you're committing financial fraud already you might as well go as big as possible, since there appears to be a cap on punishment.
I mean from mine, and im sure many other people's view, that is already mostly true. Her biggest mistake to me seems like messing with a big dog, rather than screwing over little guys that don't have millions to throw at the courts or teams of full time lawyers. If JPMorgan defrauded the same amount of money from a bunch of regular joes I doubt anybody would be in jail or even that any potential fees would come anywhere to matching the amount of money defrauded.
Strong anti fraud rules (even for massive banks) are a foundational part of a high functioning society.
That remindes me of all those bank executives we jailed over their role in the 2008 financial crisis.
ah yes, so clearly we must make sure that they are even less enforced. what could go wrong? hell, Enron lost investors-- bunch of billionaire fat cats, the lot of 'em-- $75 billion... they shoulda made Kenneth Lay Chairman of the Fed! or i guess maybe he his net worth had one too many zeroes to be sympathetic... hell, Kawhi Leonhard and his uncle blatantly and deliberately broke all of the NBA salary cap rules in the way that an undercover cop asks everyone they come across if they can buy weed from them, but the Clippers are owned by Steve Ballmer, so it's apparently okay. we hate the player because of the game in everything except for sports lmao.
> Strong anti fraud rules (even for massive banks) are a foundational part of a high functioning society.
Sometimes it seems we're missing most of the "foundational part[s] of a high functioning society" except the ones that serve elites (which then are so sacred *and must never be questioned).
Eventually people stop caring about the elite's protections, even if that breakdown is ultimately harmful. It's like the murder of that United Healthcare CEO. His company ground down the common man's benefits in a way that probably killed thousands (at least), but we're supposed to cry for him. Betray people long enough, and they're no longer interested in holding up their side of the bargain.
If they want a high functioning society, the elites need to work harder at holding up their end of the bargain.
The trick is that you have to do the fraud at institutional scale. E.g. rating junk mortgage bonds as "AAA".
You only get punished if you do it at small scale.
Alternatively, a golden device to the right ruler also works
I'm unconvinced. Banks wield massive political power through their capital, and so get away with highway robbery all the time. 2008 financial crisis comes to mind. It seems to me that the rules are one sided and so it seems this "foundational part" of high functioning society is just guarding the highwaymen with the cityguard, when the swords should be facing the other direction.
Could it be that you're not in a high functioning society, rather than the point being invalid?
The banks at the center of the 2008 crisis are largely international. Is your question about the entire western international finance system and all societies comprising it?
It's generalized to any grouping.
Having written laws means nothing when they are not equally enforced. Which is the norm in the West.
For example: Intentional wage theft.
Anti fraud rules sending people to jail are what we're discussing, and the proposition that they're necessary for a high functioning society. If we have these rules, and society is not high functioning, then, it seems you and I agree, that they're not necessary for a high functioning society.
Those rules need power to enforce. That power lies with the elites. And elites don’t suffer as much as the small person does.
So high functioning be damned. I want a society that has heart.
Have you ever heard of second-order effects?
> a prison camp
Is this different from a real/general prison? I mean does it have better facilities, space et cetera?
This is a good question. I did Googling. Here is what I found:
From the US Federal Bureau of Prisons: https://www.bop.gov/about/facilities/federal_prisons.jsp
The Elizabeth Holmes Wiki page says she is staying here: Federal Prison Camp, Bryan (Texas).Check out this Wiki quote: https://en.wikipedia.org/wiki/Federal_Prison_Camp,_Bryan
No fence!Oh, it looks like Ghislaine Maxwell (of Jeffrey Epstein fame/infamy) is also staying there.
The hardest bit of that Camp Bryan wiki is this disparity.
Ruby Jane McMillan - part of a meth supply ring. Sentenced to 38 months, completed less than 2 years.
Laurel Yurchick - had 50g of meth on her. Sentenced with intent to supply to 10years - not due for parole until 2029.
So one was clearly higher in the supply chain yet got sentenced to a third of the time?
50g is quite a lot of meth, dozens and dozens of doses even at the heavier user quantities: https://www.medrxiv.org/content/10.1101/2025.05.09.25327334v...
That is almost certainly distribution as well. McMillan played a lesser part in this distribution ring; the two men involved were each sentenced to twelve years: https://www.justice.gov/usao-wdla/pr/monroe-men-sentenced-mo...
McMillan was involved in a group of three purchasing around a pound of meth. Yurchik was involved in a ring of 27 people in multiple states moving kilogram quantities over the course of two years: https://www.kxxv.com/news/local-news/central-texans-among-21...
The group also actively laundered its earnings though only half a dozen or so were charged for that. The feds seized seventy-two kg of meth from them, more than one hundred fifty times what this other lady was involved with, a kg of cocaine, a bunch of money, and more than a dozen firearms. These were not cases of radically unequal charging.
I don't know why you picked these two people but I get a little tired of folks presenting such a skewed view of any and everything to come up with "prison bad, judge bad, sentence bad".
Who do you think had the better lawyers?
Lawyers don't have much to do with this part of the process. Adults-in-custody have a points system that reflects where they fall on the ladder as far as custody level goes. More in Program Statement 5100: https://www.bop.gov/policy/progstat/5100_008cn.pdf
Lawyers have a huge impact on how the case (and defendant!) is presented, what is and is not considered in the trial or plea, what plea the person gets - or if they get one at all, etc.
> Yurchick was one of 21 people that had been indicted for conspiracy to possess with intent to distribute kilogram quantities of methamphetamine in Texas and elsewhere from August 2019 to March 2021 … Yurchick subsequently pleaded guilty to that charge on February 1, 2022
From https://en.m.wikipedia.org/wiki/Icy_Blu
Feel free to dig deeper, I’ve only taken a shallow look.
Does the dormitory housing have internet?
If yes, I wouldn't even mind sitting there for a while. Might even start a new company with so much time on my hands.
Google AI tells me:
Honestly, I think it would be great to allow inmates to use the Internet for studying and building relevant job skills.It should have a very strong filter, though.
You don't want inmates posing as children on Facebook, for example.
I suppose it's too easy to f* this up, so it won't happen.
If only their role is limited to being a Subservient Chicken.
https://en.wikipedia.org/wiki/The_Subservient_Chicken
https://www.youtube.com/watch?v=rGjtE_SOn70
I would pay to boss around country club criminals in chicken suits like Ghislaine Maxwell and Donald Trump over the internet, in the name of rehabilitation.
Jeez that place looks better than so many schools even vacation homes. Something's really wrong with this picture.
Well, have you seen "maximum" security prisons in Norway and Finland? It is really something else. You can find videos on YouTube about it. It looks like a summer camp. Of course, they have high social goals to reintegrate these people into regular society when their sentence is complete.
Well, someone wished her too well.
Jeffrey Epstein, the New York Financier?!?
The word "camp" really doesn't make it sound better does it. Certainly doesn't suggest a more cushy version of prison.
It sounds more like they get put on a rock in the middle of the Pacific.
did u transition out in corecivic?
I got picked up by my partner, thankfully. I was a self-surrender too.
I did hear that they yanked out all the valuable assets from Cimarron (OKC's out-of-custody transfer facility) and now all the doors are manually keyed, amongst other things.
the reduction of time works out well for shorter sentences, but for longer sentences, you will have to serve at least close to the 85% . If you know you will be guilty, you can void bail and work on your sentence early so you get some time served.
I’m curious your relation to the BOP—there are all but a few of us here. My email is in my profile if you’d care to share.
The FSA and SCA do wonders for shorter sentences indeed. The recent push (at least on paper) for more timely transitions to community custody is welcomed and very overdue.
Sentence length is hard to stomach when you experience first hand how it all but strips people of their future. People get 10 years in the US that would be no more than 1 anywhere else, and then society expects them to come out rehabilitated and ready to contribute to society starting from, most commonly, zero.
Halfway houses don’t fix that. Home confinement doesn’t fix that. I’m lucky to have a highly marketable skill and a high degree of ability which makes my experience different than most.
I ask myself all the time how it gets fixed. In this society, I don’t think there’s a chance.
[flagged]
> It’s hard to take your views on sentencing seriously
I have no idea why he had to surrender a year and a half of his life to a notoriously dangerous "correctional" institution for redistributing television streams. For profit or not. I think his incarceration represents an abuse of the system to protect sports monopolies. I genuinely wonder if it wasn't cruel and unusual.
No offense but he clearly wasn't some elite hax0r with the capability of bringing significant portions of American infrastructure to it's knees for the purposes of harming the public at large.
This should have been a civil case.
Professional sports league games are the output of the efforts of thousands of people and billions of dollars of capital. The right to distribute video of those games are the largest part of how those leagues make money, as arranged by contracts and underpinned by intellectual property law.
This is not a case of "you're just bottling tap water". There is tremendous value created by these leagues as represented by their revenues. It is totally absurd to me that someone can believe stealing that intellectual property at scale is not a crime. It is no different than stealing a laptop. In fact, it's worse! The ease by which the scale of the theft can amplified is like stealing thousands of laptops. Do you believe stealing laptops and selling them is criminal?
> It is no different than stealing a laptop.
I reject this assertion.
> In fact, it's worse!
It is not. If I can copy your laptop: You still have a laptop. I also have one now. So it's actually the opposite of worse. It's not nearly as bad.
> Do you believe stealing laptops and selling them is criminal?
Do you still have a laptop? Then why should I be punished in a jail cell? If you want to settle for cash, we can talk, but if you intend on threatening my life over copies then you have lost the plot.
We likely won't agree on this. I think you're wrong and theft should absolutely be criminal, and theft of certain magnitude should result in prison time.
But, he wasn't sent to prison just for the theft and distribution. He also "illegally intruded into MLB computer networks" and then "engaged in an attempt to extort approximately $150,000 from MLB ".
He plead guilty to all of this. You think all of that should just be settled via lawsuit, too?
> "illegally intruded into MLB computer networks"
Well.. as you yourself said: they're a billion dollar company. I expect them to secure their own infrastructure better. One guy with spare time working from home bested them? The FBI is not there to cover corporate negligence.
> He plead guilty to all of this.
Then he almost certainly would have settled very quickly in a civil case.
> You think all of that should just be settled via lawsuit, too?
Yes. It's the appropriate remedy. It's the fastest and most direct path to justice for the harmed entity.
If you're still so thirsty for blood then ask yourself if simple probation with agreed restrictions wouldn't have brought about the same outcome. Would the NFL and MLB have felt just as "protected" with this simple jurisprudence?
Textbook ad hominem fallacy.
His views on whether he takes responsibility for his crimes goes directly to the credibility of his views on sentencing/punishment of crime.
No, they obviously don't ... which is why your comment is dead.
> it doesn’t really seem like you take accountability for your crimes.
from the blog:
> # Why the illicit digital transmission [charge]?
> I definitely did this.
You cherry picked. That was only one of the charges. He minimizes or denies the legitimacy of other charges.
The other charges all looked like they were way for the prosecutors to get leverage. You yourself said:
> stole copyrighted content, distributed it for pay
which is the very charge I have "cherry-picked".
His views on sentencing have nothing to do with if he believes he did anything wrong.
who cares if he take accountability or not. he served his time.
His probation officer does as he has not done his full time. (Which is why the thread about it is now flagged)
You're mistaken ... it's the ad hominem attack on him that is flagged and dead.
No. I mean that there was a full submission on him on HN front page this morning, that later was flagged out of concern, because he has in fact a probation officer that should maybe not see this.
Reading about you a bit. Would you say I shouldn't go and try to create the replacement for Streameast?
>> 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.
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-...
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.
> 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.
I’m sure that that one line manager who reported the fraud to the CEO was well rewarded. How he learned what he did? We’ll never know. Too bad his team had to be let go.
> 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.
What did you find? Low bitrates? Smaller resolutions? Enquiring minds want to know.
Presumably https://www.coreylynnfayman.com/the-pixelon-con/
It was just an MPEG wrapper.
Terrible weissman scores.
Was the scam that the codec had the raw video in it, so the "files" could be made trivially small?
The one I looked at had a little video receiver in the box. You can draw your own conclusions from there.
My conclusion is “they were storing the video in the cloud”? (Tongue in cheek interpretation)
I mean, that would work. It's going to be the reason AI video compression works; people are okay with an AI model being 1GB but they wouldn't put up with libavcodec being 1GB.
It's a valid codec move to have 1GB in the codec but to be able to compress arbitrary video with it, or even just arbitrary video within a certain specialized domain. Having those requirements will affect all the cost/benefit decisions that get made when people decide whether to use it, but if it outperforms on other metrics it may be something that wins in some places.
I believe lumost is referring to the actual video being used for testing being embedded in the codec. That is not a valid move; it compresses just that one exact video arbitrarily small (honestly anything above zero bytes is just sandbagging, you can always map the empty file to your test video, for INFINITE COMPRESSIONS!!!1!) but nothing else.
>> people are okay with an AI model being 1GB but they wouldn't put up with libavcodec being 1GB.
If people are happy with the results of the libavcodec, you could rebrand it as "libavcodec-ai" and now you have a more effective codec that might be bigger, but is now palatable to users :-)
Between this and the other compression scams mentioned in the thread, is there any connection to the show Silicon Valley? I haven’t heard of this genre of scam before but it sounds a lot like the premise of pied piper!
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".
I've occasionally been asked by an investor to do DD on some inventor's idea. Whenever it's an obvious scam I turn down the job. If I tell the truth and say it's a scam, the "inventor" will sue me. If I lie and say the technology has promise, the investor will sue me when he loses his investment.
There's no upside to a job doing DD on a scam.
>> I've occasionally been asked by an investor to do DD on some inventor's idea. Whenever it's an obvious scam I turn down the job. If I tell the truth and say it's a scam, the "inventor" will sue me. If I lie and say the technology has promise, the investor will sue me when he loses his investment.
Wouldnt the non-confrontational approach here be to agree with everyone on a benchmark, build up the benchmark, and showcase results?
Probably. The problem is that scammers are very clever with demos e.g. there's always a battery hidden inside the free energy device and they won't let you take it apart. One can work around such obstacles with very carefully designed tests, but then the scammer makes up some excuse not to agree to those conditions so you have to go back and forth and it becomes so expensive to do the DD exercise that the investor cancels the project.
Some people might be able to make this kind of business work but I don't have the patience or the political skills for it.
You need better contracts.
Roel Pieper -- anything to do with Pied Piper? ;)
https://nl.wikipedia.org/wiki/Jan_Sloot
https://www.youtube.com/watch?v=eYdLGz3XBE8
He's a windbag. I never understood how they could even think of making him head of Philips. And to this day he claims that Sloot's box worked. The group I worked for was a bunch of wealthy Dutch guys, several of whom ended up defrauding other investors. Great little world...
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.
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.".
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.
A variation on this would work, but alas we don't have the math tools as yet.
The idea (not mine) is that you can think of data as "very large numbers". So a 4096 bit number is just a big number.
Well, we have a short way to generate big numbers. x^y. So given a big number (say 800 000 bits) we could generate a (Hopefully short) expression of the form a^b + (or minus) c^d + ... etc.
Unfortunately the "factorizing" (and indeed ecpansion) of a large number in this way can't (currently) be done quickly.
But in concept enormously large binary files could be compressed to tiny strings.
It would not work for arbitrary inputs. See the pigeonhole principal: you can’t represent all possible n-bit values with fewer than n bits, because otherwise you’d have at least one case where multiple input values map to the same output value. On decompression, which one do you go with?
And if that’s not convincing, then consider that any perfect compression scheme would be able to compress its own output even smaller, until you end up with a single bit output for any possible input.
So no, that wouldn’t work in general. Some specific values may compress well, but most others can’t. It’s not a matter of difficulty of finding the right answers, as much as you probably can’t do it.
To add to this, useful compression algorithms exploit patterns in the input data. A common pattern to target is repetition, since most files contain lots of repeated byte sequences.
The pattern that factorization targets are numbers that factor well. I doubt this is a pattern you’d find in any file worth compressing, it doesn’t have a clear relationship to file data.
Amendment: autocorrect changed “provably can’t do it” to “probably” above. It’s not probable. It’s certain.
Aside from the factorizing cost, I suspect decompression will also be prohibitively slow. Exponentiation, multiplication and addition such large range numbers could still end up prohibitively expensive.
In addition to the performance problems there's the basic fact that no such scheme can possibly work (as proven by the pigeonhole principle).
High compression rate schemes that actually work compress high likelihood inputs and expand low likelihood inputs by accounting for the characteristics that make inputs high likelihood--e.g., redundant highly patterned texts. Schemes that are agnostic about the input, like the one described here, are as likely to expand any given input as they are to compress it.
That’s correct. I’m a little sleep deprived at the moment but that’s definitely the mathematical reason it’s not even feasible to begin with.
harebrained. like a rabbit
I think we called these "fairy cake" schemes, after the Douglas Adams bit.
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…
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.
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.
> 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.
Using a low hurdle to show it still failing is a good rhetorical technique, but you lowered your hurdle too far here. Yes technically specifying the order of 6000 segments takes more than 8KB. Because it takes 8.14KB. That's a rounding error. What could have been a useful argument is now a nitpick. And what if the movie was only 98 minutes, now it fits? What a mixed message.
It's a good reference point, but I'd replace "is not even enough" with "would only be enough".
8kb to specify the order of the clips, but not a single bit is used to describe a single pixel of a single frame.
Yes. That's why it's "only enough to".
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.
https://en.wikipedia.org/wiki/Vector_quantization
https://sound.stackexchange.com/questions/45719/perceptual-n...
If I hadn't seen something like this myself I would never believe it. In the late 90s I worked at a very large tech company, for the CTO. The company was considering investing in a startup that claimed to be able to transmit fiber-like data rates on high voltage transmission lines, somehow by using microwave. I was asked to comment on this. Within a few seconds I said it had to be a scam per Shannon, and at any rate said high voltage lines typically already have fiber on the ground wire at the top of the towers. The company went ahead with the investment.
I think I remember this, or a similar scam around the same time. What stood out to me is that one of the big six was hired to certify the legitimacy of the "black box", despite the obvious mathematical impossibility. I'm trying to find the firm ... Hm, according to Google AI it was Ernst and Young (I did a search for Ernst certifies compression technology 1990s). They apparently did two different "audits or demonstrations.
I was working at Andersen Consulting at the time, offshoot of Arthur Andersen. The Arthur Andersen that signed off on Enron (AC had before then become Accenture and separated from the audit partnership).
I chuckled to myself a few years later when the NBA draft lottery was signed off on/audited/witnessed by another Big6 firm. Yeah, give them enough money and they'll "audit" anything within some degree of plausible deniability.
yahoo paid mark cuban 3bi for his lie.
they still have the domain lol broadcast.com
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.
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.)
> 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.)
WhatsApp didn’t process financial txns and wasn’t in a regulated marketplace.
> 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.
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.
> 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.
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.
> 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.
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.
FWIW, around 1/3 of the 55 were customer support. That's not a lot of support per user, but it's not none. And it is enough to get lots of feedback to engineering about things users are having trouble with, because the better you make the product, the less overloaded customer support is.
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.
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.
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.
No you don't - they are now vulnerable to scams and you are not.
> they are now vulnerable to scams and you are not.
if the scam is not going to hurt the agent (in this case, the CEO responsible for the buy out), and the success is going to reward the agent, then the incentives are not completely aligned between the agent and the principle.
So signing the deal with less due diligence, then correcting it later (if needed) seems more profitable to the agent, while the principle takes all of the losses (if any).
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.
> Frank "[..] was helmed by a CEO that demonstrated sociopathic tendencies willing to do whatever it took.
To be fair, Jamie Dimon also fits this description.
This entire case can be explained thusly: “JPM had FOMO during ZIRP and agreed to a stupid deal without doing proper due diligence.”
This deal would’ve never happened if rates had not been cut to 0%.
>> 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!
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.
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.
Is it just me, but doesn't it seem like the concept of Frank as a business just sounds like it wouldn't have lived that long and that it might even be predatory? Frank got in trouble with the Department of Education because they used the term "FAFSA" in their domain name. I was lucky enough to have mentors in my life who warned me away from clicking on sponsored links to paid preparers if I ever decided to Google search "FAFSA". So it makes me suspect like part of their business strategy was to convince low-income students who have great difficulty submitting the FAFSA to pay them to submit it for them. I don't recall what the environment was like years ago, but there had always been a desire on the part of ED to make the FAFSA easier to fill out, and this would have totally eroded the value of Frank even if it was a legitimate business. What's also confusing is that at some point they apparently had a `.org` domain, so maybe they were also a non-profit?
Apparently they also had some kind of service to submit an aid appeal letter to the student's financial aid office. This is also a ridiculous service for low-income students to pay for because I can almost guarantee that Frank wouldn't have the context necessary to actually convince a college's financial aid administrators to give more money to one of their users.
It's almost as if the people considering the deal might have been focusing more on the financial education aspects of Frank instead of how they actually would interface with the FAFSA.
As I mentioned a bit further down, the blind spot here is they really only cared about the user list. The product itself was immaterial, so they might have overlooked or simply not cared about some of the shadier tactics to acquire it.
Agreed. FAFSA is a bit tedious to fill out but it’s not difficult. No need to pay someone to do it. They’re just going to have to ask you for all the same information anyway.
> 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.
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.
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?
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
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.
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”
> 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
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.
>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.
She never had the full proceeds in her possession. Remember, she had investors. She was venture-backed startup. She likely only had somewhere between 10% and 25% of the equity at the time that she sold the company.
>> She never had the full proceeds in her possession. Remember, she had investors. She was venture-backed startup. She likely only had somewhere between 10% and 25% of the equity at the time that she sold the company.
How does this work for the VCs? Does JPMorgan claw back money from the VCs? What if the VCs distributed to their LPs...does money get clawed back from the LPs?
Unless they spent it on crypto or buying property in a country that won't let you claw it back.
David O Leary and Mark Cuban checking in...(they sold companies for billions that were basically worthless when the ink dried)
I dont think they had to lie to Yahoo to do it though. Everyone believed in the froth of dot-com and plenty of dumb money just there for the taking from the likes of Yahoo. Kinda like today with all the AI froth.
> 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.
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.
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.
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.
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.
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.
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.
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
This was covered in "Money Stuff" (a free newsletter at Bloomberg, which is fantastic).
"Other financial firms, such as Capital One, considered buying Frank but declined after looking at a sample of the company’s user data."
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.
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".
This. Why bother going through DD properly if you can just sue the seller later if it turns out everything isn't what you expected?
I get that this is about the seller lying during the sale process, which is appropriate imho, you shouldn't be able to just lie about stuff like this. But it's the DD team's job to spot this stuff, that's what DD is all about. I notice the judge criticised the bank as well, which is a step in the right direction.
I've been part of due diligence from both sides of the table both in investment situations and cases of M&A activity. You're not really set up to detect out and out fraud like this. For one thing there might be a limited subset of data you really have access to (eg in this type of situation they may not have been in a position to see all the row level customer records before signing because they were competing for business in those customer segments so it is reasonable to restrict access. You might get aggregate data that looks sane and have to go on that for instance.
Secondly you may not actually have the time needed to check things out properly. There's often deadline pressure where the deal has to complete by a certain date or it triggers break clauses or some other party gets a right of refusal or whatever so often the clock runs out even if you would otherwise be able to do the analysis.
- a fraction of the board gets all gung ho on buying something
- board-1 gets marching orders to do due diligence. those people are typically aware of the sentiment in the board. they delegate to their underlings and share what they think the board wants,
- if you say no, you are guaranteed to upset one of your bosses. if you say yes, its typically a positive (your boss is happy),
- most M&As are typically bad ideas. Its typically nobody's fault when the thing is written off by the next management and nobody seems to mind that much. People who waved through the due dilligence are proper executives by then and the cycle continues.
Incentives are mis-aligned, and on top of this there is usually (a) not a lot of time and (b) a veil of secrecy. Missing those fake emails does not surprise me.
I'm not surprised. Was part of an acquisition by a large F100 company. There were some "interesting" accounting calculations that we discovered 2 years after.
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.
Doesn’t the Data Room solve this?
https://carta.com/learn/startups/equity-management/data-room...
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.
> Seems like the most basic of OLAP queries and two days of effort would reveal very suspicious userbase.
What would those queries look like?
SELECT COUNT(*) FROM users WHERE date_deleted IS NULL AND date_last_activity >= CURRENT_DATE - INTERVAL '120 days';
I don't think that would work, the stories said they generated fake data. There would be users presumably.
SELECT USER_ID,COUNT(*) FROM WEBSITE_CLICKSTREAM GROUP BY USER_ID
SELECT COUNT(*) FROM users would have been a start from the sound of it.
> 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-...
How much depth does due diligence really involve?
I'm involved with a company taking some investment from the outside. We're really just sending them copies of our documents and data.
IF someone chose to blatantly lie on that paperwork (we're not), I'm not sure how much they could spot.
In the meantime this outside group isn't querying out DB that's for sure, but even then in the example of this case, they actually generated fake user data and records.
I'm not saying you're wrong generally, but I think a lot of due diligence really does trust that someone wouldn't blatantly fake ... everything.
Checks article.
>summer of 2021
Ah, I see. Probably afraid someone else would snatch up Frank before they could in the summer of mania.
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.
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?
Different burdens of proof. The fraud charges in the US were criminal in nature which required a showing of guilt beyond a reasonable doubt. The fraud in the UK arose in the course of a civil trial with a lower burden of proof (balance of probabilities).
What's the general consensus, do you know? It seems maybe fraud occurred, but was difficult to prove conclusively?
$175M isn’t that big for JPM. It’s only 0.02% of its market cap.
They also have $4.3T in AUM. $175M for them is quite literally pennies to them.
AUM isn't relevant because it isn't their money.
Well they get fees on it so what do they care?
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.
Not true. They get payment for order flow, spread capture, cash sweep, securities lending, etc.
None of which has anything to do with their AUM
Sure AUC what’s up with all the nitting sheesh!!!
AUM is not theirs to keep; and market cap is a very deceitful metric especially for banks where liabilities dwarf the market cap.
My point is that it’s a minor transaction for them
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.
> 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.
>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.
> 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.
Right but the privacy law excuse is nonsense. All such laws (possible exception of medical data) allow for 3rd parties to be "read in" on the data for legitimate purposes. Source: worked as a consultant for companies with private data for 20 years.
I seem to remember she actively forged accounts. Even funded a genAI project with a university professor on how to credibly forge accounts
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."
That’s not how it works in venture. Investors want to be rewarded immediately. There might be an earn-out, but it’s relatively minor as compared to the purchase price – maybe 10% to 25%. And just as often, it’s not an earn-out of the original purchase price – it’s an incentive to outperform on top of the purchase price.
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.
Bringing the court case and winning it is to demonstrate a lack of professional competence from JP Morgan. The team should be fired for cause.
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Anyone who was an adult in this industry back in 2021 remembers the wacky funding shit going on.
This is not surprising in any way.
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.
> designing career programs for formerly incarcerated women.
Gonna come in handy!
It seems like the effect of these college requirements is to teach ambitious young Americans that the way to get ahead is to cheat.
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.
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.
It's a valuable lesson.
They need to spend more time on the "not getting caught" chapter, I guess.
Did the judge do any due diligence on that list?
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...
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.
Hindsight bias, and you're wrong by saying that the $5k were conditional on the line item change (they weren't). Here's the quote from the indictment:
It is very common for large companies to ask for changes to line items as it helps the finance team categorize. Also, it's clear from this conversation that the scientist believed the $5k to be a generous tip.Even if all of that weren't the case, this should be a case of innocence until proven guilty; it's easy to see the crime in hindsight, but if you suspect nothing that thought might just not cross your mind in the first place.
You can call it hindsight bias if you want. What you seem to be saying is that your heuristics would have told you that Javice had no nefarious intent based on that exchange, and you would of course have been wrong. My heuristics are very different.
It is very obvious to me that the extra $5k was "conditional" because if Scientist-1 hadn't sent back an invoice for $18,000, he wouldn't have gotten paid $18,000.
I have never heard of a company giving a 40% "tip" after the fact to a contractor who was already billing $600/hour. It seems like Scientist-1 did not question this tip because it didn't benefit him to do so. He didn't suspect anything because he was motivated against suspicion. That's a lack of integrity.
I am sure if she could pull the wool of JP Morgan's eyes, she could convince Scientist-1 that it was legit. "I want to expense it under Marketing not R&D, which would let us pay you more. My CPA's eyes glaze over, can you uplevel it?" or something
You could imagine something like that happening, but from the email conversation quoted in the indictment, it doesn't seem like there was even a token attempt at justifying it.
To complement this, once when I was earning some money to type documents through computer and print them for many purposes (rent contracts, college homework and others), a woman asked me to fake their printed pregnant exam which was saying that her wasn't pregnant, I rejected, she insisted to print a simple "Yes" and I persisted without a sweat! I was young at the time about 14 years old.
try to search for samples of lab results (OCR dev, long story)... don't include anything about pregnancy or any keyword even close to it. and you will be shocked how the entire first page will be services selling positive pregnancy tests. I had no idea there was a market for that.
> she falsely represented that the data she provided to Scientist-1 was a random sample of a much larger database of Frank users
Makes me wonder if Scientist-1 believed they were merely anonymizing real data; and/or generating data for some other purpose?
That was after he generated the data. It's not like Scientist-1 could just not do the work at that point.
I've done consulting work a bit like this. Being asked to change the invoice: consolidate lines and change the description, is very common. If I were asked to do that I'd just do it, without questioning the reason. Being asked to do that in exchange for extra money is...very odd. Like she did something completely unnecessary that signals wrongdoing. Was she trying to get caught?
Reminds me of the old "I did not go to jail" story:
https://a16z.com/why-i-did-not-go-to-jail/
Sometimes getting outside advice is a good idea.
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.
It's worth it just for sleeping better at night.
Mattresses tend to be better at home than in prisons
The ethical stand serves the dual purpose of: a) trying to make sure the company does the right thing, and b) avoiding liability.
Seems like Engineer-1 failed at stopping her, but managed to avoid taking any blame at the end of the day.
Gaming a benchmark seems pretty small beer to be honest. Usually such things are presented with small print that tips off the customer, who will do their own benchmarks if they are not dumb.
Perhaps better to draw the line at things that are potentially illegal or break some obvious fiduciary duty.
> Gaming a benchmark seems pretty small beer to be honest
Not if the benchmark is "What emissions does your diesel engine produce?"
Nice. Find accomplices by leveraging the power gradient of employment. Giving them legal advice to boot. Think that should add more time. It's an evil thing to do.
> 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.
> 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.
I think the difference is PG faked it until he could make it work at some future endpoint, Charlie Javice gave up on trying to make it work and instead faked it at the endpoint
> 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.
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.
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?
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.
> 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.
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.
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.
I agree that people shouldn't kid themselves about criminal liability, but not that criminal liability is routinely incurred by startups.
> 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.
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.
Limo services are also regulated by the TLC in NYC.
The rules are different between taxis and black cars, but there are still rules.
Uber drivers need a TLC license in NYC and fall under the same regulations.
Was this true from the very start of Uber in NYC?
Has the Taxi & Limousine Commission always regulated limo services in NYC? Yes, since it replaced the Hack Bureau fifty years ago.
Did they sue for damages? JP Morgan did not waste time.
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.
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.
classic article: Everything Everywhere is Securities Fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
Nice paywall.
> 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)
> Javice was among a number of young tech executives who vaulted to fame with supposedly disruptive or transformative companies, only to see them collapse amid questions about whether they had engaged in puffery [...]
I'm assuming the key punisher here is the "collapse" rather than the "puffery". I don't think I've seen an "honest", "unpuffed" company since the 90s when companies were still wishing their customers merry christmas over the radio.
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!
Reading Kornetzke's summing up of America, this fragment reminded me of SV and VC culture in particular:
"greed exalted as ambition"
You can google "It is America’s shadow made flesh" to find the entire passage.
fwiw whoever makes 30 under 30 list also acknowledges it: https://www.forbes.com/sites/forbesunder30team/2023/11/28/ha...
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.
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.
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.
The one person I know who made that list drunkenly confessed to doctoring his high school transcripts to get into college.
Do you know the journalist's name? I'd love to be part of Forbes' 10 billion under 10 billion.
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.
The forbes 30 under 30 to prison pipeline needs to be studied.
I'm thinking a "Wharton <-> Prison <-> 30 Under 30" Venn diagram would have a decent sized center.
Stanford actually, but yeah.
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.
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.
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.
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,”
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.
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...
> “haunted that my failure has transformed something meaningful into something infamous.”
Not a US resident, so this may be off-base, but IIUC this a student loan platform, or rather actually just a better interface to it?
It was a service that aided in filling out a well known federal form (for student loans). Similar to how there are multiple companies that sell a service to fill out (prepare) federal forms for income tax.
Why are these forms so complex? The eternal question. The tax forms companies actually lobby against simplifying.
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.
Less likely to happen. They had their pay days!
> 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.
The Management Consulting to Prison Pipeline.
Does anybody have the number for how much she will likely make off with ultimately ten years from now once everything settles?
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.
And not only does she have to pay $300M – she didn’t even get the $175M that JPM paid. A lot of that — the majority most likely — went to her investors.
Ignoring this posturing from the prosecution, what is the precedent?
What decides if a founder will get convicted or walk free like Adam Neumann did / Builder.ai guys did ?
Steal from the public not powerful well-connected financial institutions
Connections.
And make sure you steal from the right people.
Vulnerable
> 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.
Goes to remorse.
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.
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.
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.
"In 2022, JPMorgan filed a lawsuit for fraud, claiming that the data reported by Frank was largely a fabrication and
alleged that Javice paid a data science professor $18,000 for a list of more than four million fake student names to convince JPMorgan to purchase Frank."
How do you pay that much money to get synthetic data? What a racket. I wonder if the professor feels shame for their complicity here.
Could have waited for a few months and got an LLM do it for her.
There is a specific distribution of names of people that is very hard to fake. Think all the different first names, last names, their spellings and common names. Generating that many realistic fake names that still match the distribution of real names is hard.
So if a distribution exists and the data scientist is aware of it and knows hed need to match it within some deviation then that is pretty trivial to do in not too much time of coding and not too much runtime. If guy doesn't have that and doesn't know hes party to a fraud then its just as easy, random match first names and last names from a limited list. There's no training scenario imaginable that would be taking into account some particular name details. Guy was probably paid near 10k per hour, which I don't know, might trip me up a bit.
When I said it's "hard" I mean for the average non-technical person, or someone who doesn't have access to a real-world dataset with millions of names for comparison.
You can easily find such datasets on the dark web, FYI.
Banks scamming people is fine and legal, but don’t you dare to scam banks, know your limits, peasant!!
Another Forbes 30 under 30!
It's funny how a lot of those media blurb lists are just "this person says they're doing things at a functional business".
This feels like a case of both parties getting caught up in their own bullshit.
It seems unlikely that the founder was intentionally fabricating data in order to commit fraud. Far more likely is that the founder was caught up in Silicon Valley startup culture, told they were disrupting industries and changing the world, and didn't put enough into actually doing the work, and ended up thinking their company was much more important than it was. Throw in some of the toxicity of #girlboss culture (this is a criticism of the negative aspects, we do need more female founders), and you get a Dunning-Kruger situation. I can see how someone would then keep digging rather than pull out if things started to turn.
On the other side, JPMorgan obviously didn't do any real due diligence. They were too caught up in the industry hype, and want to continue their cosplay as a tech disruptor. Finding this would have taken almost no effort, there wasn't much attempt to hide it. Promoting what the company wants to be true rather than what is actually true is a clear sign of a rotten culture – people won't speak up even when there is literally no good outcome that can come from staying silent. JPMorgan got exactly what they deserved with this deal.
I feel sorry for the founder getting caught up in the cultural currents that led to this, and while they need some accountability, a prison sentence probably isn't right.
Yes it was dumb and dumber, but once you get to writing programs to fabricate user data for DD purposes, you're in the Bernie Madoff camp. He also defrauded dumb people, and various smart people concluded he had to be a criminal. Still a criminal.
The startup world is made up of grifters of all sorts that make up BS all the time. And yet, in the end it’s always the women that get spectacularly sentenced? The only exception I can think of is SBF, but that was a quite different case.
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.
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.
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There is still time to buy some Trump crypto
Yeah I'm surprised she didn't donate to the Trump campaign, seems like a huge misstep on her part.
No different than ozy.com's story, and Carlos Watson got the pardon. It helped that he was basically Powell-Jobs's pet (one of the owners of the Democratic Party), then kissed Trump's ass on top. His entire deal was making connections with rich white people who wanted a black friend to tell them they were not only good people, but the best people. Excellent work if you can get it.
I don't think you can start this charm offensive after the crime, though. The only person I've ever seen manage that is Rob Blagojevich.
As has been said, the value of standing under a huge tree is more the shade, not the fruit. Your rich friends may never do anything for you, they might only value your friendship because you're one of the few who have never asked them for anything. But, consistent with that, if somebody attacks you they'll defend you as hard as they defend their other possessions. That kind of armor enables you to pluck fruit from other trees.
Has anyoine from JPMC gone to prison for 2008 yet?
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.
He broke an unwritten, cardinal rule, which is to never steal from the rich.
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.
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.
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.
> 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).
> 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"?
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.” "
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.
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
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.
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
[dead]
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.
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.
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.
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.
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...
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.
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.
Sure, if you believe crypto is a currency.
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
Yes, which is why SBF is in jail for 25 years.
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?
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,".
> (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.
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.
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.
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.
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.
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."
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.
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.
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!
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.
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.
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.
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!
She
same as Theranos
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.
If I steal all your money I shouldn't go to jail?
I personally believe money crimes should have money punishments and corporal crimes could have corporal punishments. If you steal from me and go to jail how did I benefit? If you steal from me and I get a bunch of $ for pain and suffering and you get your pay docked for n years that seems good.