...alongside other scrupulous business luminaries like Sam Bankman Fried, Shkreli and Holmes.
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.
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.
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.
The fact that they didn't do enough research doesn't mean it's okay to scam them, though.
Lessons abound here. Slow down on the tech habit folks, especially if you're an investment bank and not a VC incubator.
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.
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?
True, if one does not mind risking the Orange Jumpsuit scenario
It is absolutely, 100% morally OK to scam investment bankers. It's just not legal.
Clearly, if only 10% of the list was real, it would be pretty easy to validate that with a small random sample.
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.)
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.
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.
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.
You can of course hold to a particular standard, but if a competitor is willing to relax that standard, you lose a distinct advantage.
Risky decisions happen all the time in business, as long as the risk is outweighed by the perceived reward.
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).
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%.
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.)
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.
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.
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.
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.
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.
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.
What would those queries look like?
https://www.highereddive.com/news/jpmorgan-chase-alleges-ed-...
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-...
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 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.
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 :-)
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.
There was bad blood between the managers. My immediate manager bypassed his immediate manager and went above a few levels. Top management lost all confidence in the team and decided to can the project. We were all treated as peasants and told to find other jobs inside or outside the company.
What did you find? Low bitrates? Smaller resolutions? Enquiring minds want to know.
It was just an MPEG wrapper.
It was not all that dissimilar from what Nikola Motors did when they pushed a non-working Hydrogen truck down a hill and filmed it and said look, the truck is working great. They too were caught. And eventually got an Italian company to produce a truck and put their name on it. And then eventually went bankrupt. But not before the officers, including the founder made bank on the entire scam. CEO was convicted of fraud. But he paid/donated $1m to Trump and was swiftly pardoned.
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".
There's no upside to a job doing DD on a scam.
Wouldnt the non-confrontational approach here be to agree with everyone on a benchmark, build up the benchmark, and showcase results?
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.
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.
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.".
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.
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.
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.
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.
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.
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.
On a second thought, the compression alone would destroy information. NVM.
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".
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.
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.
they still have the domain lol broadcast.com
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.
https://carta.com/learn/startups/equity-management/data-room...
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.
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.
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".
"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 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.
>summer of 2021
Ah, I see. Probably afraid someone else would snatch up Frank before they could in the summer of mania.
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.
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.
- 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.
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...
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.
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.
The rules are different between taxis and black cars, but there are still rules.
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.
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.
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.
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.
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.
PG "got caught" at a moment when Yahoo (the acquirer, I think?) had already decided on a deal it valued and was willing to deal with some accounting mess to close it. Javice got caught by an investment bank with rather different ideas about value who perceived the "accounting mess" as active fraud.
In a culture (this culture!) where everyone cheats, the actors lose sight of how to judge what cheating is acceptable.
Not prosecuted, and not prosecutable, are two different things.
> And they got stinking rich!
Which in no way validates their actions, ethically nor legally.
I, for one, would hope "don't commit crimes!" is taught in business school ethics. (LMAO as if an MBA has ethics)
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.
> 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”
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.
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.
Makes me wonder if Scientist-1 believed they were merely anonymizing real data; and/or generating data for some other purpose?
Seems like Engineer-1 failed at stopping her, but managed to avoid taking any blame at the end of the day.
Perhaps better to draw the line at things that are potentially illegal or break some obvious fiduciary duty.
Not if the benchmark is "What emissions does your diesel engine produce?"
https://a16z.com/why-i-did-not-go-to-jail/
Sometimes getting outside advice is a good idea.
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.
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.
> 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.
This seems utterly irrelevant to the sentencing, but what do I know.
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.
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.
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.
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.
> 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."
This is not surprising in any way.
These lists have such a bad reputation these days that legit top folks are asking their PR people to keep the off!
"greed exalted as ambition"
You can google "It is America’s shadow made flesh" to find the entire passage.
Separately, I hope a few folks at JPMC got fired over this. Even the most basic of due diligence should have caught this.
"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.
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.
Gonna come in handy!
If so, it's quite possible she considers the profit well worth the penalty.
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,”
They do, however, have a cap on the commissary of like $400 a month or so. So even if you're a billionaire it's not super helpful (although you can probably cut deals to add a little bit to other people's accounts, etc..)
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.
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.
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 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.
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)
Having written laws means nothing when they are not equally enforced. Which is the norm in the West.
For example: Intentional wage theft.
So high functioning be damned. I want a society that has heart.
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.
You only get punished if you do it at small scale.
Is this different from a real/general prison? I mean does it have better facilities, space et cetera?
From the US Federal Bureau of Prisons: https://www.bop.gov/about/facilities/federal_prisons.jsp
> 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.
Check out this Wiki quote: https://en.wikipedia.org/wiki/Federal_Prison_Camp,_Bryan
> 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.
Oh, it looks like Ghislaine Maxwell (of Jeffrey Epstein fame/infamy) is also staying there.
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.
> No Internet Access: Inmates are strictly prohibited from accessing the internet.
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.
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.
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?
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".
From https://en.m.wikipedia.org/wiki/Icy_Blu
Feel free to dig deeper, I’ve only taken a shallow look.
It sounds more like they get put on a rock in the middle of the Pacific.
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.
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."
You can easily find such datasets on the dark web, FYI.
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.
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?
Why are these forms so complex? The eternal question. The tax forms companies actually lobby against simplifying.
frogperson•4mo ago
showmexyz•4mo ago
mothballed•4mo ago
If you turn a profit no one cares (unless you're Shkreli, don't think his investors lost money, but he pissed off some politicians because he said the quiet parts out loud about how the pharma industry works), if you lose it's fraud.
When all the winners are doing it, hard to compete otherwise... not that it makes it right.
privatelypublic•4mo ago
Outside of Bribery and ?SarBox? (Whichever regulation handles kickbacks, etc), I can't think of anything.
mothballed•4mo ago
If you get investor money or get a loan on the basis of funding logistics investments, bet it on roulette red, and go bankrupt, I would expect you'd be looking at hard jail time for fraud.
So I'm thinking the crime would be nothing, because he was a winner, and the optics totally changed, and fraud relies on very subjective opinions of a jury.
bryanlarsen•4mo ago
mothballed•4mo ago
I think you are definitely in a much worse place for a fraud conviction if you lose money.
bryanlarsen•4mo ago
https://techcrunch.com/2024/05/08/ftx-crypto-fraud-victims-t...
mothballed•4mo ago
If you want an accurate reflection, note how much of the crypto deposited went in, and then how much came back out after SBF lost it.
This would be like me depositing USD, someone stealing some of it, then you bragging the value went up because I have a larger quantity as measured in Venezuelan Bolivars. What actually happened is their % they recouped was less than 100 until you artificially change to an entirely different currency.
bryanlarsen•4mo ago
Macha•4mo ago
bryanlarsen•4mo ago
BobaFloutist•4mo ago
bryanlarsen•4mo ago
Losing the gains put SBF in jail for 25 years. Mothballed original comment was "So I'm thinking the crime would be nothing,".
stackskipton•4mo ago
If I stole 1000 bucks from you 3 years ago and repaid 1080 back now, sure, you got some interest, but you still be pretty unhappy with not having access to that money. For some, lack of access to that money could have been extremely damaging.
potato3732842•4mo ago
What's the TL;DR? His wikipedia page doesn't make it obvious.
mothballed•4mo ago
This made a bunch of powerful people absolutely enraged, as he was basically publicly bragging about jacking the ever living fuck out of the prices. Pharma companies do this but Shkreli would publicly say it and tell the truth that basically the other companies were doing it while pretending to be good people, and he was only being honest about it. Poor people were pissed because they were told they couldn't get their drugs (I'm unaware if the program that allowed uninsured people to get them for cheap was real or not), and the rich insurance people pissed because he was basically he was bilking them.
So they went back and discovered one or some of his other early enterprises weren't profitable, but that he had used money he made off his later pharma enterprises to pay back his earlier investors.
In trial, his investors testified they were happy with the situation, lost no money, and would invest with him again. But they still convicted him for fraud, even despite the 'victims' themselves did not believe they were defrauded. It didn't help that Shkreli is probably one of the most profoundly unlikeable people you can possible listen to, unless you're not bothered to hear a hyper-capitalist be honest about how they do business.
potato3732842•4mo ago
notmyjob•4mo ago
mothballed•4mo ago
In this case the wife never called the cops, and then when the cops showed up she claimed she wasn't beat, and not only that she has no visible marks or bruises or anything.
And none of this is justifying any of it. Just showing how far outside of what we commonly see in fraud cases that actually get convicted.
FireBeyond•4mo ago
He would paint himself as a working man's hero, "I'm making insurers pay more so you can get your drugs cheaper", always avoiding the awkward questions of where the insurer's money came from and why premiums kept rising (note that I'm also not siding with insurers here, especially those who have implemented PBMs to leech money into their pockets). He basically treated the public as useful idiots who thought that insurance was paying more for their drugs out of ... charity? Goodwill? The money fairy?
Then there was also the fact that at least once (and to a slightly lesser extent, twice), he went to the FDA to block the approval of a new drug, arguing it shouldn't be on the market. Why?
Not because it was less effective than the market options - it had better results.
Not because it had more/worse side effects, complications and interactions - it had better results there too.
Not because it was prohibitive, or patenting or anything stifling to the market.
No, it was because Shkreli had recently purchased a manufacturer of one of those existing drugs and their portfolio, and had been in the process of ramping up his price gouging on that drug, i.e. "The FDA should block approval of this better drug because it limits my ability to profit from my 'worse' drug."
mothballed•4mo ago
FireBeyond•4mo ago
1123581321•4mo ago
While she committed fraud, I feel sorry for her because of her naivety. It must've been a sick moment when they asked to examine the data during due diligence. If she'd known that would be used for marketing integration so quickly, maybe she would have backed out of the deal.
miltonlost•4mo ago
She's not naive. She was told this was illegal and then did it still. She knew this was fraud.
1123581321•4mo ago
IncreasePosts•4mo ago
It made me wonder what she was thinking when her $30M share landed in her bank account. "Whee, I got away with it", "it's their problem now"?
I don't think I would commit fraud, but if I did it for that amount, I would be on a flight to Malaysia or some other place with no extradition with the US!
curiousObject•4mo ago
That was FedEx’s founder, Fred Smith. It wasn’t UPS
He only had $5,000 of funds remaining, which he gambled playing blackjack, so the potential loss to investors was small. He’d already lost almost all their investments through operating FeDex
FireBeyond•4mo ago
At that point he had been stiffing his pilots on wages for weeks or months, and with many also paying fuel bills on their personal credit cards/checks, since many fuelers had canceled FedEx's accounts.
Yeah, $5K isn't a whole lot, but if I'm a pilot struggling to put food on my family's table, and the CEO takes company money to Vegas, I'm not thinking "Oh, but the investors" or "Sure, it's not that much money anyway".
I don't see why people (not saying you, in particular) see this as some heroic founder "risking it all". He wasn't. He was risking the company's "all", after asking the employees to suck up his mismanagement.
curiousObject•4mo ago
I agree. He was asking employees not to cash their paychecks sometimes. $5000 is inconsequential compared to that forced investment from employees and business partners
IncreasePosts•4mo ago
troyvit•4mo ago
fourseventy•4mo ago
troyvit•4mo ago
taytus•4mo ago
arbuge•4mo ago
ChrisMarshallNY•4mo ago
"She".
The name is "Charlie," but it's a young woman.
And, like another young woman, she stole from the rich, and got jailed.
She'll probably get a federal minimum-security prison (no fences and a golf course).
They aren't quite "Camp Cupcake," but they are a far cry from places like Leavenworth (I've known folks that have done time in both).
Aurornis•4mo ago
You just don't hear about them as much because someone going to jail for stealing $60K from a couple families from their church in a fake real estate scheme isn't as exciting as a massive fraud against JP Morgan.
HankStallone•4mo ago
I knew one local HVAC company where the office manager skimmed off six figures over something like 20 years before she got caught. Just slow and steady, never taking enough to be obvious, I guess. It happens more than people would think.
wil421•4mo ago
rdtsc•4mo ago
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"?