CEO of Cyber Fraud Startup NS8 Arrested By FBI, Facing Fraud Charges (forbes.com) 26
An anonymous reader quotes a report from Forbes: The CEO of a startup that sold fraud prevention software is facing fraud charges after he was arrested Thursday by the FBI in Las Vegas. Adam Rogas, who abruptly resigned from NS8 earlier this month, is accused of misleading investors who poured in $123 million to his company earlier this year, a deal in which he allegedly pocketed more than $17 million. "Adam Rogas was the proverbial fox guarding the henhouse," acting Manhattan U.S. Attorney Audrey Strauss said in a press statement. "While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud."
NS8 launched in 2016 to provide online fraud detection and prevention software for small businesses. More than 200 NS8 employees were laid off last week after executives told them the company was under investigation by the SEC for fraud. The news was startling for many, considering the company had announced a $123 million Series A funding round in June, led by global VC firm Lightspeed Venture Partners. In a statement, NS8 said that its board "has learned that much of the company's revenue and customer information had been fabricated by Mr. Rogas." The company added that no other employees or stakeholders had been charged and that it is cooperating with federal investigators. In its complaint, filed in the Southern District of New York, the Justice Department alleged that from January 2019 to February 2020, between 40% and 95% of NS8's assets were made up. During that period, the agency alleged, Rogas presented doctored bank statements to reflect over $40 million in fictitious revenue. Charges by the Justice Department carry penalties up to 20 years in prison. Rogas is expected to face a judge in Nevada on Friday.
NS8 launched in 2016 to provide online fraud detection and prevention software for small businesses. More than 200 NS8 employees were laid off last week after executives told them the company was under investigation by the SEC for fraud. The news was startling for many, considering the company had announced a $123 million Series A funding round in June, led by global VC firm Lightspeed Venture Partners. In a statement, NS8 said that its board "has learned that much of the company's revenue and customer information had been fabricated by Mr. Rogas." The company added that no other employees or stakeholders had been charged and that it is cooperating with federal investigators. In its complaint, filed in the Southern District of New York, the Justice Department alleged that from January 2019 to February 2020, between 40% and 95% of NS8's assets were made up. During that period, the agency alleged, Rogas presented doctored bank statements to reflect over $40 million in fictitious revenue. Charges by the Justice Department carry penalties up to 20 years in prison. Rogas is expected to face a judge in Nevada on Friday.
Who or what tipped them off, (Score:3)
if he hadn't any co-conspirators?
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Of course there were co-conspirators. If the company had a CFO then "between 40% and 95% of NS8's assets were made up" is simply not possible. If a CFO or any other officer of the company remained unaware of this then they should be arrested for another type of fraud. Surely an exec would've caught on at some point in the past 18 months.
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No it doesn't "depend". Even glorified accountants have to verify the basic existence of assets. They do that by calling the fricking bank for starters, at the most basic level.
Re: Who or what tipped them off, (Score:1)
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Even your scenario requires co-conspirators.
Re: Who or what tipped them off, (Score:1)
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Um, "Rog[ue/a]s"? It's right in the name.
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There doesn't necessarily have to be co-conspirators involved if the company setup has no checks and balances. You would be surprised at how often a CFO is installed at a startup who has no idea of what he is doing because in prior positions he always had everything set up for him beforehand and the people he was working for weren't corrupt.
The Prediwave [businesswire.com] case involved a lot more money and a lot more obvious raping of corporate assets by an out-of-control CEO. I happened to know about it because my comp
Second Dotcom Bubble strikes again (Score:2)
Every bubble (tech, real estate, financial, whatever) is always going to have its share of frauds. This is small potatoes compared to something like Theranos, but it does seem like there's a lot of fraud surrounding early stage VC-backed companies.
One thing that's unclear to me reading the complaint is that it looks like it was venture capitalists who were tricked, not public market customers. Do all the same securities fraud rules apply to selling to VCs as well? I thought the whole idea of a VC firm is th
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Not all of them.
But faking bank records? Can't get more blatant than that. Unless he 'faked' them only in the sense of using shell companies and / or a pyramid scheme to trick the bank into producing actual but misleading records - which sounds not to be the case.
Seems obvious (Score:2)
Who better to tell people how to prevent fraud than a fraudster?
Obvious joke (Score:2)
Maybe he should have used his fraud prevention software!
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Maybe he should have used his fraud prevention software!
Well, after he (the CEO) went and got approval from the CFO (also portrayed by him), he cut himself a check to go purchase his own software, but then ran into the CMO (also himself) down in sales, and was gently reminded that his software, only comes in vaporware format.
This transaction was of course well-documented in bank records, but in reality the entire thing took less than 3 seconds, ending with a resounding slap to the forehead.
The Wizard of Lies (2017) (Score:2)
Watch the Wizard of Lies about The fall of Bernie Madoff, whose Ponzi scheme robbed $65 billion from unsuspecting victims; the largest fraud in U.S. history.
You can see how this kind of Fraud works, basically separate the workers from the Fraudsters (Put them in a back room and only you get to communicate between them both.)
Irony at its best (Score:2)
Queue "Isn't it Ironic" by Alanis..