1 00:00:04,400 --> 00:00:07,800 Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio. 2 00:00:12,080 --> 00:00:14,640 Speaker 1: Hey there, and welcome to tech Stuff. I'm your host, 3 00:00:14,800 --> 00:00:17,760 Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio 4 00:00:17,840 --> 00:00:22,160 Speaker 1: and I love all things tech. And in a recent episode, 5 00:00:22,400 --> 00:00:25,840 Speaker 1: I talked about funzy schemes and how you know that's 6 00:00:25,840 --> 00:00:30,720 Speaker 1: an old scam that gets refreshed by enterprising con artists 7 00:00:30,800 --> 00:00:35,920 Speaker 1: every so often, with recent examples centering on cryptocurrency, and 8 00:00:36,040 --> 00:00:39,599 Speaker 1: that actually got me to thinking about startup culture and 9 00:00:39,640 --> 00:00:43,600 Speaker 1: how some startups appear to be sincere, but maybe they're 10 00:00:43,600 --> 00:00:46,880 Speaker 1: too ambitious to really work in the real world, and 11 00:00:47,000 --> 00:00:49,519 Speaker 1: some seem like maybe they were just smoking mirrors the 12 00:00:49,720 --> 00:00:52,959 Speaker 1: entire time. So today I thought we'd go through some 13 00:00:53,080 --> 00:00:57,000 Speaker 1: of those types of startups and talk about the world 14 00:00:57,120 --> 00:01:00,639 Speaker 1: of startups in technology and why it can be so 15 00:01:00,720 --> 00:01:03,440 Speaker 1: risky to invest in them. Now. There are a lot 16 00:01:03,480 --> 00:01:07,560 Speaker 1: of common elements among startups in general, not just in tech, 17 00:01:07,959 --> 00:01:10,760 Speaker 1: and a lot of what we see frustrates me because 18 00:01:11,200 --> 00:01:13,640 Speaker 1: you would think that by now people would learn their 19 00:01:13,760 --> 00:01:17,240 Speaker 1: lesson when it comes to hype machines. Right, we should 20 00:01:17,240 --> 00:01:20,640 Speaker 1: all be pretty familiar with the hype cycle, and you 21 00:01:20,640 --> 00:01:24,200 Speaker 1: would think with familiarity we would be more resistant to it, 22 00:01:24,280 --> 00:01:26,680 Speaker 1: and yet we're not. And I include myself, and that 23 00:01:26,880 --> 00:01:30,280 Speaker 1: I get caught up in hype too, even as I 24 00:01:30,319 --> 00:01:34,200 Speaker 1: recognize that there's a pattern here that just doesn't hold up. 25 00:01:34,600 --> 00:01:38,080 Speaker 1: But I guess we have enough long shots that do 26 00:01:38,200 --> 00:01:43,240 Speaker 1: payoff that keep people figuratively and literally invested. I mean, 27 00:01:43,440 --> 00:01:47,639 Speaker 1: what if the next opportunity pays off and you didn't 28 00:01:47,760 --> 00:01:50,240 Speaker 1: get in on the ground floor, you just missed a 29 00:01:50,320 --> 00:01:54,960 Speaker 1: huge payout. So I guess I can understand the tendency, 30 00:01:55,080 --> 00:01:58,520 Speaker 1: but it also reinforces the general truth that humans as 31 00:01:58,520 --> 00:02:02,600 Speaker 1: a rule are really bad at stuff like risk assessment 32 00:02:02,880 --> 00:02:06,240 Speaker 1: and understanding the odds, which, hey, you really you just 33 00:02:06,320 --> 00:02:08,920 Speaker 1: have to look at the fact that you know lotteries 34 00:02:09,000 --> 00:02:12,000 Speaker 1: are a thing to know that that is true. There's 35 00:02:12,000 --> 00:02:16,640 Speaker 1: a general philosophy amongst startups that goes something like move 36 00:02:16,720 --> 00:02:21,040 Speaker 1: quickly and break things. That taking big chances is encouraged 37 00:02:21,080 --> 00:02:24,440 Speaker 1: because you know, while you're more likely going to fail, 38 00:02:25,360 --> 00:02:28,119 Speaker 1: you'll learn a lot in the process, and that means 39 00:02:28,160 --> 00:02:30,560 Speaker 1: you'll actually have a better chance at success next time. 40 00:02:30,560 --> 00:02:33,800 Speaker 1: We learn a lot through failure, or you might find 41 00:02:33,800 --> 00:02:37,080 Speaker 1: that quote unquote breaking what was previously considered to be 42 00:02:37,120 --> 00:02:40,520 Speaker 1: a best practice leads to you finding an even better 43 00:02:40,600 --> 00:02:44,160 Speaker 1: way to do things, but it can also create the 44 00:02:44,200 --> 00:02:47,280 Speaker 1: perfect climate for someone to engage in a little snake 45 00:02:47,320 --> 00:02:50,960 Speaker 1: oil peddling, because in a world where seemingly anything is possible, 46 00:02:51,440 --> 00:02:54,400 Speaker 1: there's no such thing as impossible, and that means you 47 00:02:54,440 --> 00:02:56,840 Speaker 1: can get money for stuff that just plane don't work. 48 00:02:57,520 --> 00:03:01,480 Speaker 1: The current reigning champion of that model is Theopos, which 49 00:03:01,840 --> 00:03:05,120 Speaker 1: I have covered extensively in the past, but for a 50 00:03:05,200 --> 00:03:09,800 Speaker 1: quick overview, Elizabeth Holmes, Stanford dropout and a big fan 51 00:03:09,840 --> 00:03:13,240 Speaker 1: of Silicon Valley leaders like Steve Jobs, set out to 52 00:03:13,280 --> 00:03:15,840 Speaker 1: create a company centered on a new kind of blood 53 00:03:15,880 --> 00:03:19,920 Speaker 1: analysis device, and the idea is alluring. Imagine a machine 54 00:03:20,080 --> 00:03:23,520 Speaker 1: about the size of a desktop printer that could analyze 55 00:03:23,520 --> 00:03:26,519 Speaker 1: the tiniest drop of blood and run more than a 56 00:03:26,600 --> 00:03:30,800 Speaker 1: hundred fifty tests on that sample. The machine presents a 57 00:03:30,840 --> 00:03:35,320 Speaker 1: comprehensive but easy to understand report on that sample and 58 00:03:35,360 --> 00:03:39,800 Speaker 1: thus gives the administrator insight into the patient's current state 59 00:03:39,840 --> 00:03:42,800 Speaker 1: of health and also pointing out any indicators that you 60 00:03:42,840 --> 00:03:45,120 Speaker 1: know might suggest the patients should be on the lookout 61 00:03:45,160 --> 00:03:49,800 Speaker 1: for future complications. It could help patients be more proactive 62 00:03:50,080 --> 00:03:53,920 Speaker 1: and choose new lifestyle routines to live their healthiest lives. Heck, 63 00:03:54,160 --> 00:03:57,440 Speaker 1: once the cost of making the devices declined enough, it 64 00:03:57,520 --> 00:04:00,920 Speaker 1: could potentially be something the average can shumer purchases for 65 00:04:00,960 --> 00:04:04,360 Speaker 1: their own home, and thus informing the average person about 66 00:04:04,400 --> 00:04:07,520 Speaker 1: their own health before they go to say their annual 67 00:04:07,640 --> 00:04:11,560 Speaker 1: check up, people would make more informed decisions about their health. 68 00:04:11,800 --> 00:04:14,760 Speaker 1: They would be able to have better conversations with healthcare providers. 69 00:04:15,120 --> 00:04:19,520 Speaker 1: It would really democratize healthcare. And that is a heck 70 00:04:19,680 --> 00:04:22,320 Speaker 1: of a sales pitch, and from the business side, it's 71 00:04:22,320 --> 00:04:25,360 Speaker 1: easy to see how it could be a freaking gold 72 00:04:25,440 --> 00:04:30,160 Speaker 1: mine because the healthcare industry is already a multi trillion 73 00:04:30,720 --> 00:04:34,800 Speaker 1: dollar market. Holmes was confident and she was convincing. And 74 00:04:35,240 --> 00:04:38,200 Speaker 1: over the past two decades, we've seen technology do stuff 75 00:04:38,240 --> 00:04:41,400 Speaker 1: that you know, three decades ago would seem impossible. The 76 00:04:41,440 --> 00:04:44,680 Speaker 1: Internet alone was a huge revelation, and now we can 77 00:04:44,720 --> 00:04:47,080 Speaker 1: carry de vice in our pockets that less access at 78 00:04:47,080 --> 00:04:50,640 Speaker 1: wherever we are. So it's mundane today, it's it's commonplace. 79 00:04:50,720 --> 00:04:54,279 Speaker 1: But thirty years ago it would have seemed bonkers. And 80 00:04:54,360 --> 00:04:58,200 Speaker 1: so it's not really surprising that investors rushed in to 81 00:04:58,320 --> 00:05:00,880 Speaker 1: get in on the ground floor. Of homes this enterprise, 82 00:05:01,400 --> 00:05:04,960 Speaker 1: the return on investment would be unbelievable. It could be 83 00:05:05,000 --> 00:05:07,080 Speaker 1: as if you were able to travel back to the 84 00:05:07,120 --> 00:05:10,560 Speaker 1: mid nineties when Apple Stock was trading below five dollars 85 00:05:10,560 --> 00:05:12,880 Speaker 1: a share, and you bought up a ton of it 86 00:05:12,920 --> 00:05:15,279 Speaker 1: because you know how much it's going to grow in 87 00:05:15,320 --> 00:05:18,520 Speaker 1: the future when Steve Jobs comes back. It helped that 88 00:05:18,600 --> 00:05:22,680 Speaker 1: most investors had little, if any understanding about the technology 89 00:05:22,720 --> 00:05:26,320 Speaker 1: involved in blood analysis. That's something that you'll remember is 90 00:05:26,360 --> 00:05:29,560 Speaker 1: a red flag when it comes to stuff like Ponzi schemes. 91 00:05:30,160 --> 00:05:33,279 Speaker 1: In this case, Farness wasn't so much a Ponzi scheme 92 00:05:33,360 --> 00:05:35,800 Speaker 1: as it was a company centered around an idea that 93 00:05:35,960 --> 00:05:40,960 Speaker 1: was just not really realistic. More knowledgeable experts in the 94 00:05:41,040 --> 00:05:45,760 Speaker 1: area of blood analysis had warned that Holmes's goal was unattainable, 95 00:05:45,960 --> 00:05:49,120 Speaker 1: that the technology just, you know, it's not there to 96 00:05:49,200 --> 00:05:51,920 Speaker 1: do something as comprehensive as what Holmes had in mind. 97 00:05:52,440 --> 00:05:56,120 Speaker 1: But the investments just kept pouring in, and if it 98 00:05:56,160 --> 00:05:59,880 Speaker 1: had just failed, the company had just ultimately had to say, 99 00:06:00,000 --> 00:06:02,640 Speaker 1: you know what, we tried, it didn't work, We're sorry. 100 00:06:02,720 --> 00:06:04,920 Speaker 1: Our story would really just be about how a lot 101 00:06:04,960 --> 00:06:07,679 Speaker 1: of people got excited about an idea, but the idea 102 00:06:07,760 --> 00:06:10,800 Speaker 1: just didn't pan out. But of course it gets worse, 103 00:06:11,120 --> 00:06:13,760 Speaker 1: and that's because over at Therapness there were a lot 104 00:06:13,760 --> 00:06:17,599 Speaker 1: of shady things going on. There were teams legitimately trying 105 00:06:17,640 --> 00:06:20,280 Speaker 1: to get the technology to work, but in the meantime, 106 00:06:20,320 --> 00:06:22,560 Speaker 1: the company was playing a kind of a shell game 107 00:06:22,600 --> 00:06:27,040 Speaker 1: with investors and v i p s. So, according to reports, 108 00:06:27,560 --> 00:06:30,000 Speaker 1: when such a person came in for a tour of 109 00:06:30,000 --> 00:06:33,520 Speaker 1: the facility, they would get their finger pricked and submit 110 00:06:33,560 --> 00:06:36,560 Speaker 1: a tiny blood sample in this little bitty capsule and 111 00:06:36,600 --> 00:06:39,120 Speaker 1: that would be fed into a Theonos machine. But the 112 00:06:39,160 --> 00:06:41,560 Speaker 1: analysis would take a couple of hours. So instead of 113 00:06:41,600 --> 00:06:44,320 Speaker 1: just you know, waiting around, the v i p would 114 00:06:44,360 --> 00:06:47,360 Speaker 1: go on a tour, maybe they'd grab lunch with Theoroness 115 00:06:47,360 --> 00:06:52,040 Speaker 1: executives or something. Meanwhile, other staff would rush in retrieve 116 00:06:52,160 --> 00:06:56,080 Speaker 1: the blood sample from the Theonis device diluted and then 117 00:06:56,120 --> 00:07:00,120 Speaker 1: submit that diluted sample to a traditional blood analysis machine 118 00:07:00,440 --> 00:07:03,880 Speaker 1: that had been bought from an established company. In other words, 119 00:07:04,040 --> 00:07:07,320 Speaker 1: they were relying on devices that were not built by 120 00:07:07,360 --> 00:07:10,760 Speaker 1: Saronis to do the actual analysis. Then they would rush 121 00:07:10,800 --> 00:07:14,160 Speaker 1: the completed analysis back to the meeting room, and then 122 00:07:14,200 --> 00:07:16,480 Speaker 1: the team would behave as if the Tharonis device had 123 00:07:16,520 --> 00:07:19,280 Speaker 1: done all the work the entire time. It was a 124 00:07:19,280 --> 00:07:23,440 Speaker 1: particularly flashy version of the old Turk automaton chess player. 125 00:07:23,760 --> 00:07:26,120 Speaker 1: You know, the thing you're looking at is not the 126 00:07:26,160 --> 00:07:30,920 Speaker 1: actual thing that's doing the work. Sarais eventually crumbled after 127 00:07:31,000 --> 00:07:34,120 Speaker 1: insiders began leaking what was going on to others and 128 00:07:34,200 --> 00:07:39,160 Speaker 1: journalists began publishing expose s about the company. Holmes is 129 00:07:39,280 --> 00:07:42,760 Speaker 1: one of the executives who happens to be waiting trial 130 00:07:42,920 --> 00:07:46,200 Speaker 1: for multiple charges of fraud, and the name Sarah Knows 131 00:07:46,520 --> 00:07:51,880 Speaker 1: is forever associated with words like hoax and scam. Now, 132 00:07:51,920 --> 00:07:55,120 Speaker 1: just to be clear, I don't know if it was 133 00:07:55,200 --> 00:07:58,240 Speaker 1: a scam from the beginning. I suspect that, you know, 134 00:07:58,360 --> 00:08:01,680 Speaker 1: in the very earliest days, Holmes was sincere in her 135 00:08:01,680 --> 00:08:04,760 Speaker 1: belief that she can make this work, and her engineers 136 00:08:04,880 --> 00:08:07,760 Speaker 1: certainly tried to get the technology to measure up to 137 00:08:07,840 --> 00:08:11,600 Speaker 1: the vision. But somewhere along the way people started to 138 00:08:11,640 --> 00:08:14,560 Speaker 1: fudge results or rely on alternative methods to make it 139 00:08:14,560 --> 00:08:17,560 Speaker 1: seem like things were working way better than they really were, 140 00:08:18,000 --> 00:08:22,080 Speaker 1: and once they went down that path, they were committed. Now, 141 00:08:22,240 --> 00:08:26,360 Speaker 1: other companies are legit, but the people running them might 142 00:08:26,400 --> 00:08:30,520 Speaker 1: not be and that also is a big problem. So 143 00:08:30,600 --> 00:08:32,400 Speaker 1: that seemed to be the case with a company that 144 00:08:32,480 --> 00:08:35,240 Speaker 1: once upon a time was called Mozito, but for some 145 00:08:35,280 --> 00:08:39,360 Speaker 1: reasons that will soon become a parent now calls itself definitive. 146 00:08:39,800 --> 00:08:43,760 Speaker 1: So let's talk about what this company's purpose is beyond 147 00:08:44,040 --> 00:08:47,079 Speaker 1: making its founder a whole lot of money. The original 148 00:08:47,160 --> 00:08:50,679 Speaker 1: focus of Mozito was to do something pretty great. I 149 00:08:50,720 --> 00:08:53,800 Speaker 1: think so many of us have used mobile devices to 150 00:08:54,000 --> 00:08:56,840 Speaker 1: pay for stuff. You have some sort of digital wallet 151 00:08:56,960 --> 00:08:59,000 Speaker 1: that's tied to either a credit card or a bank 152 00:08:59,040 --> 00:09:02,760 Speaker 1: account or some mothers stash of cash. In a transaction, 153 00:09:02,960 --> 00:09:05,520 Speaker 1: the mobile device interacts with a merchant's point of sale 154 00:09:05,960 --> 00:09:08,120 Speaker 1: and the data zings back and forth, and soon the 155 00:09:08,160 --> 00:09:11,040 Speaker 1: appropriate amount of money goes from your stash to the 156 00:09:11,040 --> 00:09:14,120 Speaker 1: merchant stash, which is, you know, pretty simple idea. But 157 00:09:14,240 --> 00:09:18,359 Speaker 1: there's an enormous population of people who don't have bank accounts. 158 00:09:18,800 --> 00:09:22,280 Speaker 1: Mozito estimated that two and a half billion people have 159 00:09:22,520 --> 00:09:26,320 Speaker 1: access to cellular technology, but they do not have an 160 00:09:26,360 --> 00:09:30,280 Speaker 1: account with a bank or a credit union. So mobile payments, 161 00:09:30,320 --> 00:09:33,880 Speaker 1: while incredibly useful, are not within the grasp of everyone. 162 00:09:34,320 --> 00:09:36,280 Speaker 1: And so the company saw a space that it could 163 00:09:36,280 --> 00:09:40,000 Speaker 1: potentially fill creating a technology that would allow people who 164 00:09:40,040 --> 00:09:44,439 Speaker 1: are unbanked or underbanked to use mobile payments, which is 165 00:09:44,480 --> 00:09:47,480 Speaker 1: a pretty noble goal giving people a lot more options 166 00:09:47,520 --> 00:09:51,000 Speaker 1: when it comes to making transactions, and that attracted a 167 00:09:51,000 --> 00:09:54,520 Speaker 1: lot of investors. And that brings us to the company's founder. 168 00:09:55,080 --> 00:09:58,280 Speaker 1: So the founder of Mozito was a guy named Michael Liberty, 169 00:09:58,400 --> 00:10:01,839 Speaker 1: whose name is pretty fitting we're gonna see. He first 170 00:10:01,960 --> 00:10:05,120 Speaker 1: established the company in two thousand seven in Dallas, Texas. 171 00:10:05,559 --> 00:10:08,040 Speaker 1: The fact that Mozito traces its history to two thousand 172 00:10:08,040 --> 00:10:11,360 Speaker 1: seven is already pretty impressive because that's the same year 173 00:10:11,360 --> 00:10:14,040 Speaker 1: that Apple launched the iPhone, So it was a pretty 174 00:10:14,120 --> 00:10:17,480 Speaker 1: visionary move. Liberty was able to get a lot of 175 00:10:17,520 --> 00:10:20,760 Speaker 1: investors for his company, raising money in multiple rounds of 176 00:10:20,800 --> 00:10:25,240 Speaker 1: investment funding. The company relocated from Dallas to Austin, Texas 177 00:10:25,320 --> 00:10:28,640 Speaker 1: in two thousand twelve, and by two thousand seventeen, Liberty 178 00:10:28,720 --> 00:10:32,520 Speaker 1: himself would step down from the company and relocate to Florida. Essentially, 179 00:10:33,000 --> 00:10:36,080 Speaker 1: he had grown the business. He was not leading it. 180 00:10:36,240 --> 00:10:38,040 Speaker 1: He was he had founded it, but he had other 181 00:10:38,080 --> 00:10:41,560 Speaker 1: executives in charge of running the thing, and he kind 182 00:10:41,559 --> 00:10:43,760 Speaker 1: of said all right, my work year is done, and 183 00:10:43,800 --> 00:10:48,120 Speaker 1: stepped away and went to Florida. However, investigators with the 184 00:10:48,240 --> 00:10:52,920 Speaker 1: Securities and Exchange Commission or SEC were interested in some 185 00:10:52,960 --> 00:10:55,280 Speaker 1: of those investments that were supposed to be going to 186 00:10:55,360 --> 00:10:59,200 Speaker 1: Mozito because the numbers didn't seem to add up, and 187 00:10:59,240 --> 00:11:03,560 Speaker 1: the investigation indicated that Mr Liberty had taken the liberty 188 00:11:03,640 --> 00:11:06,520 Speaker 1: of moving some of that cash around so that would 189 00:11:06,600 --> 00:11:10,079 Speaker 1: ultimately fill his own pockets rather than go to funding 190 00:11:10,120 --> 00:11:13,880 Speaker 1: the company. With most of the shenanigans taking place between 191 00:11:14,040 --> 00:11:18,199 Speaker 1: and there were signs of the shell companies all designed 192 00:11:18,240 --> 00:11:21,080 Speaker 1: to obfus skate where the money was going. There was 193 00:11:21,200 --> 00:11:24,240 Speaker 1: a practice of money laundering, which is when you mix 194 00:11:24,320 --> 00:11:28,320 Speaker 1: illegally obtained cash with cash from legitimate businesses in an 195 00:11:28,360 --> 00:11:31,000 Speaker 1: effort to hide the fact that you've got filthy lucre 196 00:11:31,080 --> 00:11:35,280 Speaker 1: on your hands. Ultimately, Liberty was charged with fraud, with 197 00:11:35,320 --> 00:11:38,400 Speaker 1: prosecutors saying he had stolen more than fifty million dollars 198 00:11:38,440 --> 00:11:42,560 Speaker 1: to fund his own millionaire lifestyle, complete with mansions and 199 00:11:42,679 --> 00:11:45,840 Speaker 1: private jets. He also served a prison sentence for a 200 00:11:45,960 --> 00:11:49,400 Speaker 1: different infraction. He pled guilty to charges that he had 201 00:11:49,480 --> 00:11:53,080 Speaker 1: violated campaign finance law in two thousand eleven and was 202 00:11:53,120 --> 00:11:55,040 Speaker 1: sentenced to four months in prison and a fine for 203 00:11:55,120 --> 00:11:58,360 Speaker 1: one hundred thousand dollars in seventeen. And there were other 204 00:11:58,520 --> 00:12:02,840 Speaker 1: SEC investigations into activities beyond the ones I just described. 205 00:12:03,520 --> 00:12:08,560 Speaker 1: Now the company Mozito wasn't included in these charges. It 206 00:12:08,600 --> 00:12:12,280 Speaker 1: appeared as though everything at the company was pretty legit, 207 00:12:12,679 --> 00:12:15,160 Speaker 1: but there was a lot of turnover in the executive 208 00:12:15,160 --> 00:12:19,160 Speaker 1: suite of leadership, which probably didn't look too good to investors. 209 00:12:19,600 --> 00:12:23,840 Speaker 1: In Scott Sandlin stepped down as the CEO, and for 210 00:12:23,880 --> 00:12:28,240 Speaker 1: more than a year, Mike Love served as interim CEO, So, 211 00:12:28,280 --> 00:12:31,000 Speaker 1: in other words, this company went for more than a 212 00:12:31,080 --> 00:12:34,280 Speaker 1: year without a permanent CEO. In fact, it was thirteen 213 00:12:34,280 --> 00:12:37,040 Speaker 1: months before the company had a new official CEO with 214 00:12:37,120 --> 00:12:41,320 Speaker 1: Todd Bradley, but then Bradley quit in seventeen along with 215 00:12:41,440 --> 00:12:45,840 Speaker 1: chief financial officer Scott Ellison. The Forbes reported that Mosito's 216 00:12:45,880 --> 00:12:49,479 Speaker 1: website kept both of those men listed on their executive 217 00:12:49,559 --> 00:12:52,559 Speaker 1: leadership websit page, you know, for a few months afterward, 218 00:12:53,240 --> 00:12:56,520 Speaker 1: which seems more than a bit sus So that probably 219 00:12:56,920 --> 00:12:59,559 Speaker 1: didn't look too good from the outside, and that might 220 00:12:59,600 --> 00:13:02,880 Speaker 1: explain and why the leaders of Mozito decided to reincorporate 221 00:13:02,920 --> 00:13:06,120 Speaker 1: and change the name of the company definitive. You don't 222 00:13:06,160 --> 00:13:09,120 Speaker 1: want to be another therapist after all. While the company 223 00:13:09,200 --> 00:13:11,079 Speaker 1: may not be a scam, that doesn't mean it's a 224 00:13:11,160 --> 00:13:14,400 Speaker 1: viable business either. There have been numerous articles written about 225 00:13:14,400 --> 00:13:17,679 Speaker 1: how the company, throughout its history had found itself scrabbling 226 00:13:17,720 --> 00:13:22,719 Speaker 1: to keep things going, mostly through additional rounds of investment. Now, personally, 227 00:13:23,040 --> 00:13:24,880 Speaker 1: I hope that the company is able to get its 228 00:13:24,880 --> 00:13:27,200 Speaker 1: feet on the ground because I think the service is 229 00:13:27,280 --> 00:13:30,160 Speaker 1: valuable for all those populations who don't have access to 230 00:13:30,160 --> 00:13:33,960 Speaker 1: bank accounts. It's just unfortunate that this appears to be 231 00:13:34,000 --> 00:13:37,199 Speaker 1: a very difficult service that can be done profitably. When 232 00:13:37,240 --> 00:13:39,800 Speaker 1: you think about it, it kind of makes sense. Most 233 00:13:39,840 --> 00:13:42,840 Speaker 1: of the transactions you would imagine would be pretty small, 234 00:13:43,320 --> 00:13:46,920 Speaker 1: and so any transaction fee you would take would be 235 00:13:47,160 --> 00:13:50,000 Speaker 1: pennies on the dollar, So you would need a lot 236 00:13:50,280 --> 00:13:52,800 Speaker 1: of them in order to make a profit. You would 237 00:13:52,800 --> 00:13:56,080 Speaker 1: have to really be operating at our huge scale, and 238 00:13:56,120 --> 00:14:00,280 Speaker 1: getting that huge scale is tough. As for Liberty, he 239 00:14:00,440 --> 00:14:03,400 Speaker 1: was awaiting trial for those charges I mentioned when on 240 00:14:03,520 --> 00:14:07,320 Speaker 1: January nine one, we learned that he was one of 241 00:14:07,360 --> 00:14:11,359 Speaker 1: those lucky individuals to receive a presidential pardon from outgoing 242 00:14:11,400 --> 00:14:16,560 Speaker 1: President Donald Trump. Interestingly, reporters have sometimes referred to Liberty 243 00:14:16,679 --> 00:14:20,560 Speaker 1: as Trump but with a main accent. That's main as 244 00:14:20,600 --> 00:14:24,240 Speaker 1: in the state in the northeastern United States. Now, it's 245 00:14:24,280 --> 00:14:28,160 Speaker 1: possible we could put Mozito infinitive in the same general 246 00:14:28,200 --> 00:14:31,360 Speaker 1: category as thereins, in the sense that it may be 247 00:14:31,480 --> 00:14:35,600 Speaker 1: that the actual central idea for the business could be untenable. 248 00:14:35,960 --> 00:14:39,200 Speaker 1: Now I don't know if that's true. I'm no financial expert. 249 00:14:39,360 --> 00:14:42,000 Speaker 1: Perhaps if you could get the operations up to scale, 250 00:14:42,040 --> 00:14:47,240 Speaker 1: maybe it would all work fine. I don't know. I mean, granted, pennies, 251 00:14:47,440 --> 00:14:50,680 Speaker 1: if you've got enough of them, do amount to dollars. 252 00:14:50,720 --> 00:14:54,480 Speaker 1: So there is that. Well, we're gonna take a quick break, 253 00:14:54,720 --> 00:14:56,880 Speaker 1: and when we come back, we'll talk about some more 254 00:14:56,920 --> 00:15:00,880 Speaker 1: startups that have had big problems. But first let's take 255 00:15:00,920 --> 00:15:11,960 Speaker 1: that break. Similar in some ways to the Mozito story 256 00:15:12,000 --> 00:15:14,360 Speaker 1: we listen to just before the break is that of 257 00:15:14,480 --> 00:15:18,040 Speaker 1: bow tie, which is actually spelled b O u X 258 00:15:18,080 --> 00:15:21,440 Speaker 1: t I E. And just to be clear, this is 259 00:15:21,480 --> 00:15:25,840 Speaker 1: not the current bow tie by that spelling, which based 260 00:15:25,880 --> 00:15:28,680 Speaker 1: on what I'm looking at at my screen right now, 261 00:15:29,120 --> 00:15:31,920 Speaker 1: that's some sort of company that sells TikTok views and 262 00:15:32,040 --> 00:15:35,560 Speaker 1: video shares in order to artificially boost the performance of 263 00:15:35,600 --> 00:15:39,160 Speaker 1: TikTok videos, which is just plain lame. It's straight up 264 00:15:39,200 --> 00:15:42,320 Speaker 1: there with companies that used to sell Twitter Twitter followers, right, Like, 265 00:15:43,040 --> 00:15:45,200 Speaker 1: that's something that's fallen out of favor over at Twitter 266 00:15:45,480 --> 00:15:48,840 Speaker 1: because Twitter has done multiple cullings of bought accounts, so 267 00:15:49,640 --> 00:15:52,760 Speaker 1: those have largely been white clear of the platform. But 268 00:15:53,080 --> 00:15:56,040 Speaker 1: we're seeing that same sort of practice spread to platforms 269 00:15:56,080 --> 00:15:58,880 Speaker 1: like TikTok. If you're an influencer and you're trying to 270 00:15:59,120 --> 00:16:05,720 Speaker 1: sell your you know, big following to various sponsors, maybe 271 00:16:05,760 --> 00:16:09,920 Speaker 1: you're engaging in some of these uh, unethical activities in 272 00:16:10,000 --> 00:16:12,680 Speaker 1: order to convince those sponsors. Hey, a lot of people 273 00:16:12,680 --> 00:16:15,640 Speaker 1: watch my stuff. But no, no, no, I'm talking about 274 00:16:15,680 --> 00:16:18,520 Speaker 1: a different bow Tie It was a company founded by 275 00:16:18,560 --> 00:16:22,800 Speaker 1: an entrepreneur named Renato Libric. The idea was to create 276 00:16:22,800 --> 00:16:27,440 Speaker 1: a digital platform for gift cards and loyalty cards. Librics 277 00:16:27,520 --> 00:16:30,880 Speaker 1: bow Tie company offered users the ability to purchase digital 278 00:16:30,920 --> 00:16:33,840 Speaker 1: gift cards to all sorts of major merchants and then 279 00:16:33,880 --> 00:16:37,280 Speaker 1: customize them with graphics and messages before sending them off 280 00:16:37,320 --> 00:16:40,200 Speaker 1: to family and friends. So it was a neat way 281 00:16:40,480 --> 00:16:43,240 Speaker 1: to create a sort of personalized experience, which I think 282 00:16:43,280 --> 00:16:45,720 Speaker 1: helps take some of the stigma out of, you know, 283 00:16:45,760 --> 00:16:49,760 Speaker 1: the whole gift card thing. And being digital, it should 284 00:16:49,760 --> 00:16:53,800 Speaker 1: be relatively easy to redeem those gift cards with online accounts, 285 00:16:54,000 --> 00:16:56,840 Speaker 1: making it less likely that they would go unused. I mean, 286 00:16:56,920 --> 00:17:00,440 Speaker 1: just a year ago, c NBC reported that American possessed 287 00:17:00,480 --> 00:17:04,000 Speaker 1: more than twenty one billion with a b dollars worth 288 00:17:04,040 --> 00:17:07,320 Speaker 1: of unused gift cards in store credit. By the way, 289 00:17:07,359 --> 00:17:10,159 Speaker 1: that's kind of why merchants love gift cards. There's a 290 00:17:10,160 --> 00:17:12,480 Speaker 1: good chance they'll never have to redeem them, and the 291 00:17:12,520 --> 00:17:16,840 Speaker 1: profit margin is ridiculous. Now, with bow Tie, it doesn't 292 00:17:16,880 --> 00:17:19,920 Speaker 1: sound like Librick was trying to funnel cash to himself, 293 00:17:20,200 --> 00:17:23,560 Speaker 1: which sets him apart from folks like Michael Liberty. But 294 00:17:23,680 --> 00:17:27,560 Speaker 1: he did forge signatures and produce false documents to make 295 00:17:27,600 --> 00:17:30,560 Speaker 1: it seem as though bow Tie was worth far more 296 00:17:30,760 --> 00:17:33,440 Speaker 1: than its true value in an effort to convince more 297 00:17:33,440 --> 00:17:37,240 Speaker 1: investors to pour money into the venture. So in that respect, 298 00:17:37,640 --> 00:17:40,359 Speaker 1: I guess that bow Tie is kind of similar to 299 00:17:40,400 --> 00:17:43,040 Speaker 1: the bow tie of today. So the bow tie of 300 00:17:43,080 --> 00:17:46,879 Speaker 1: today is all about inflating TikTok numbers, and Libric was 301 00:17:46,920 --> 00:17:50,439 Speaker 1: all about inflating the apparent value of bow tie. So 302 00:17:51,119 --> 00:17:54,240 Speaker 1: there's more going on there than I originally thought. Well, 303 00:17:54,280 --> 00:17:57,320 Speaker 1: perhaps Libric was just desperately trying to get some momentum 304 00:17:57,400 --> 00:18:00,840 Speaker 1: going with the hope that once things were really moving, 305 00:18:01,000 --> 00:18:03,119 Speaker 1: he'd be able to stick to the straight and narrow. 306 00:18:03,720 --> 00:18:06,960 Speaker 1: But he was caught out. Towards the end of ten 307 00:18:07,119 --> 00:18:09,840 Speaker 1: Librick was found guilty of wire fraud and sentenced to 308 00:18:09,920 --> 00:18:12,560 Speaker 1: thirty six months in prison in order to pay out 309 00:18:12,600 --> 00:18:15,280 Speaker 1: more than one and a half million dollars in restitution. 310 00:18:15,880 --> 00:18:18,040 Speaker 1: Based on what I've read, I would say that this 311 00:18:18,080 --> 00:18:20,880 Speaker 1: is another case where someone had an idea that sounded 312 00:18:20,920 --> 00:18:24,080 Speaker 1: pretty good, proved to be harder to pull off profitably 313 00:18:24,240 --> 00:18:27,360 Speaker 1: than was first anticipated, found it difficult to get enough 314 00:18:27,400 --> 00:18:31,040 Speaker 1: investments to stay afloat, and then resorted to illegal means 315 00:18:31,080 --> 00:18:34,440 Speaker 1: to cover the bills. Now, one person whose name has 316 00:18:34,480 --> 00:18:37,439 Speaker 1: to come up when you're talking about grandiose start up 317 00:18:37,520 --> 00:18:41,720 Speaker 1: ideas is Elon Musk. One of the numerous ideas Musquez 318 00:18:41,840 --> 00:18:45,080 Speaker 1: championed is that of the hyper loop. So, in short, 319 00:18:45,160 --> 00:18:48,120 Speaker 1: a hyper loop system, at least on the original design 320 00:18:48,520 --> 00:18:52,960 Speaker 1: would involve trains traveling inside tubes, and inside those tubes 321 00:18:52,960 --> 00:18:55,240 Speaker 1: you would pump out most of the air to be 322 00:18:55,400 --> 00:18:58,679 Speaker 1: very low air pressure, almost a vacuum, and that cuts 323 00:18:58,720 --> 00:19:02,160 Speaker 1: way down on wind resist sense. In addition, the trains 324 00:19:02,240 --> 00:19:06,000 Speaker 1: would not travel with wheels on a track. Instead, they 325 00:19:06,000 --> 00:19:09,520 Speaker 1: would travel atop air bearings. Essentially, a cushion of air 326 00:19:09,600 --> 00:19:12,959 Speaker 1: would keep the trains afloat above the inner surface of 327 00:19:13,000 --> 00:19:17,080 Speaker 1: the tunnel. Electro Magnets would provide the propulsion to accelerate 328 00:19:17,240 --> 00:19:21,400 Speaker 1: and decelerate the trains, which, with such reduced friction, would 329 00:19:21,400 --> 00:19:24,440 Speaker 1: be able to travel at incredible speeds like essentially the 330 00:19:24,480 --> 00:19:28,320 Speaker 1: speeds that you would see aircraft travel. One startup that 331 00:19:28,359 --> 00:19:33,520 Speaker 1: formed after Musk's proposal was Hyperloop Technologies, founded by Shervin 332 00:19:33,680 --> 00:19:39,280 Speaker 1: Pishavar and former SpaceX engineer Brogan Bam Brogan. The story 333 00:19:39,320 --> 00:19:41,879 Speaker 1: of that company is way too long for this episode, 334 00:19:41,920 --> 00:19:46,600 Speaker 1: and it involves tons of scandals and also mergers and 335 00:19:47,080 --> 00:19:51,080 Speaker 1: name changes and some seriously ugly in fighting, and Pischavar 336 00:19:51,200 --> 00:19:54,000 Speaker 1: would step down in the wake of sexual harassment charges, 337 00:19:54,359 --> 00:19:58,040 Speaker 1: which he maintains was all a smear campaign. The company 338 00:19:58,080 --> 00:20:00,399 Speaker 1: is still around today. In fact, it's the one that 339 00:20:00,520 --> 00:20:04,120 Speaker 1: conducted a successful test with people aboard a hyperloop capsule 340 00:20:04,280 --> 00:20:07,480 Speaker 1: back in November of twenty but the company would change 341 00:20:07,480 --> 00:20:11,280 Speaker 1: its name from Hyperlop Technologies to Hyperloop One to Virgin 342 00:20:11,359 --> 00:20:15,400 Speaker 1: hyper Loop one, and now it's just Virgin Hyperloop. Anyway, 343 00:20:15,440 --> 00:20:17,760 Speaker 1: the company I wanted to cover is the one that 344 00:20:17,840 --> 00:20:22,520 Speaker 1: Brogan bam Brogan would found after leaving Hyperloop one. So 345 00:20:22,640 --> 00:20:25,240 Speaker 1: bam Brogan and a couple of other executives all left 346 00:20:25,320 --> 00:20:27,560 Speaker 1: hyper Loop one at the same time and filed a 347 00:20:27,640 --> 00:20:31,520 Speaker 1: lawsuit against their former employer. They alleged that the company 348 00:20:31,520 --> 00:20:38,720 Speaker 1: had violated numerous agreements and abandon its fiduciary responsibilities, and worse, 349 00:20:38,840 --> 00:20:43,080 Speaker 1: they alleged abuse and threats, and the company would file 350 00:20:43,119 --> 00:20:47,240 Speaker 1: a countersuit against those former executives, alleging that they had 351 00:20:47,240 --> 00:20:50,000 Speaker 1: attempted to rest control of the company away from the 352 00:20:50,119 --> 00:20:53,640 Speaker 1: leadership team and the board of directors, essentially that they 353 00:20:53,640 --> 00:20:57,160 Speaker 1: were planning a coup. Both parties would settle their lawsuits 354 00:20:57,200 --> 00:21:00,720 Speaker 1: out of court in sixteen, and Bam Brogan then founded 355 00:21:00,760 --> 00:21:05,040 Speaker 1: a competing hyper loop company called Arrivo. He and a 356 00:21:05,080 --> 00:21:09,480 Speaker 1: couple of other colleagues formed Arrival in two thousand seventeen one. 357 00:21:09,520 --> 00:21:13,960 Speaker 1: Co founder Andrew Leeu had previously worked with a construction 358 00:21:14,000 --> 00:21:17,800 Speaker 1: company called a Calm a e c o M. Another 359 00:21:17,840 --> 00:21:21,160 Speaker 1: co founder was Jaden Smith, who, like dam Brogan, had 360 00:21:21,200 --> 00:21:24,880 Speaker 1: previously worked with SpaceX. He had also previously worked with 361 00:21:25,080 --> 00:21:28,840 Speaker 1: the CIA. Now, the hyper loop design is an interesting 362 00:21:28,960 --> 00:21:32,639 Speaker 1: and innovative one, but it also will require a ton 363 00:21:32,920 --> 00:21:36,040 Speaker 1: of money to make it a reality. Musk was first 364 00:21:36,080 --> 00:21:39,520 Speaker 1: talking about the idea way back in and we're still 365 00:21:39,520 --> 00:21:43,720 Speaker 1: in the experimental and testing stages in one and that's 366 00:21:43,760 --> 00:21:46,159 Speaker 1: just get to a point where we're confident that the 367 00:21:46,200 --> 00:21:49,560 Speaker 1: technology is a viable one for the purposes of transporting 368 00:21:49,600 --> 00:21:53,920 Speaker 1: people and cargo quickly and safely. After that, you've got 369 00:21:53,920 --> 00:21:57,080 Speaker 1: the daunting task of actually securing the legal rights to 370 00:21:57,200 --> 00:22:01,600 Speaker 1: build out routes between different destinations. That includes everything from 371 00:22:01,640 --> 00:22:06,600 Speaker 1: securing permission from various local governments and environmental agencies, to 372 00:22:06,680 --> 00:22:12,320 Speaker 1: the actual construction and more. It's time consuming and really expensive. 373 00:22:12,920 --> 00:22:16,400 Speaker 1: Perhaps for that reason, Arrival dumped the idea of going 374 00:22:16,440 --> 00:22:19,840 Speaker 1: the hyperloop throughout entirely, so instead it would go with 375 00:22:19,880 --> 00:22:24,919 Speaker 1: a more established technology, that of magnetic levitation. Maglev trains 376 00:22:24,920 --> 00:22:28,200 Speaker 1: have been around for a while. The technology is well understood, 377 00:22:28,240 --> 00:22:32,119 Speaker 1: it's proven to work, we use it today. And essentially 378 00:22:32,280 --> 00:22:35,959 Speaker 1: you've got magnets of similar polarity in the tracks and 379 00:22:36,160 --> 00:22:39,959 Speaker 1: under the trains, and since similar polarities repel one another, 380 00:22:40,359 --> 00:22:42,880 Speaker 1: like when you try to push the north pole of 381 00:22:42,920 --> 00:22:47,280 Speaker 1: two different permanent magnets together, the train will hover over 382 00:22:47,400 --> 00:22:49,639 Speaker 1: the track. You no longer have to deal with the 383 00:22:49,680 --> 00:22:54,080 Speaker 1: friction of wheels against rails or anything like that. The magnets, 384 00:22:54,119 --> 00:22:56,960 Speaker 1: by the way, can be permanent, they can be electro magnets, 385 00:22:57,080 --> 00:22:59,320 Speaker 1: or they can be a combination of the two. On 386 00:22:59,400 --> 00:23:02,880 Speaker 1: top of that, Arrival wasn't planning on and closing its 387 00:23:02,880 --> 00:23:06,040 Speaker 1: tracks and tunnels, so there would be no low pressure 388 00:23:06,080 --> 00:23:10,280 Speaker 1: track system with Arrivo, which again would significantly cut down 389 00:23:10,320 --> 00:23:13,640 Speaker 1: on construction and operation costs, though it would also mean 390 00:23:13,720 --> 00:23:16,320 Speaker 1: that the trains would have encounter some air resistance when 391 00:23:16,320 --> 00:23:19,160 Speaker 1: traveling down the tracks, so these would not be able 392 00:23:19,200 --> 00:23:22,080 Speaker 1: to go at the wicked fast speeds of the proposed 393 00:23:22,160 --> 00:23:25,800 Speaker 1: hyper loop trains. The company had planned to build a 394 00:23:25,840 --> 00:23:29,399 Speaker 1: test track out in Colorado, but Arrival was having a 395 00:23:29,440 --> 00:23:32,600 Speaker 1: lot of trouble getting investors on board, perhaps the fact 396 00:23:32,680 --> 00:23:35,399 Speaker 1: that they were no longer pursuing the more ambitious and 397 00:23:35,880 --> 00:23:39,960 Speaker 1: inarguably more risky hyper loop design. Or maybe it was 398 00:23:40,000 --> 00:23:42,960 Speaker 1: because of the very messy and very public breakup between 399 00:23:43,000 --> 00:23:46,600 Speaker 1: the Arrival founders and hyper Loop One, maybe that had 400 00:23:46,680 --> 00:23:49,840 Speaker 1: left kind of a stain on things within the company. 401 00:23:49,960 --> 00:23:53,399 Speaker 1: Things seem to be kind of off as well. An 402 00:23:53,440 --> 00:23:57,080 Speaker 1: anonymous employee posted a review on glass door. That's the 403 00:23:57,119 --> 00:24:02,199 Speaker 1: website that allows employees to review their workplaces. The review 404 00:24:02,240 --> 00:24:05,399 Speaker 1: claimed that the Arrival offices were operating with little or 405 00:24:05,520 --> 00:24:09,399 Speaker 1: no direction from leadership, and the report also indicated that 406 00:24:09,520 --> 00:24:13,480 Speaker 1: a leader later implied to be Vam Brogan himself brought 407 00:24:13,560 --> 00:24:16,040 Speaker 1: an axe to the office and then used it to 408 00:24:16,119 --> 00:24:20,120 Speaker 1: hack chunks out of the walls and frustration, which, yeah, 409 00:24:20,160 --> 00:24:22,679 Speaker 1: I mean if my boss showed up to my office 410 00:24:22,680 --> 00:24:24,719 Speaker 1: with a tool that could be used as a lethal 411 00:24:24,760 --> 00:24:27,440 Speaker 1: weapon and then he went around hitting the walls with it, 412 00:24:27,800 --> 00:24:32,400 Speaker 1: I too would describe my office environment as quote unquote unstable. 413 00:24:33,000 --> 00:24:37,760 Speaker 1: Arrival failed to secure Series A investment funding. Jaden Smith 414 00:24:37,800 --> 00:24:42,800 Speaker 1: and Andrew Leeu quietly parted ways with Arrival in Not 415 00:24:42,960 --> 00:24:46,359 Speaker 1: long after that, the company furloughed employees and then laid 416 00:24:46,400 --> 00:24:49,600 Speaker 1: off about half of them. Then it shut down the 417 00:24:49,600 --> 00:24:52,480 Speaker 1: startup just failed to get any momentum, which, as I 418 00:24:52,560 --> 00:24:54,520 Speaker 1: understand it, is a bad thing if you're trying to 419 00:24:54,520 --> 00:24:57,880 Speaker 1: move people from one place to another. It's very possible 420 00:24:58,080 --> 00:25:01,760 Speaker 1: that the fallout from Hyperloop one doomed arrival from the start, 421 00:25:02,160 --> 00:25:05,600 Speaker 1: though the descriptions I've seen of Bam Brogan's behavior may 422 00:25:05,680 --> 00:25:08,960 Speaker 1: also have played a part in any case, this is 423 00:25:09,000 --> 00:25:11,440 Speaker 1: an example of a startup that didn't really get a 424 00:25:11,520 --> 00:25:14,560 Speaker 1: chance to start up at all. And like I said, 425 00:25:14,600 --> 00:25:16,280 Speaker 1: I'll have to do a full treatment on the story 426 00:25:16,280 --> 00:25:20,040 Speaker 1: of Virgin Hyperloop at some point, because y'all that could 427 00:25:20,040 --> 00:25:23,680 Speaker 1: be a soap opera. Another startup that had a more 428 00:25:23,760 --> 00:25:28,680 Speaker 1: spectacular collapse was one for dot one. That is the 429 00:25:28,800 --> 00:25:36,280 Speaker 1: numeral one f O R dot oh n E not great, right? 430 00:25:37,200 --> 00:25:41,239 Speaker 1: Actually I should say I really mean job Sonic. Wait no, no, no, 431 00:25:41,240 --> 00:25:44,760 Speaker 1: I'm sorry, I should mean work Riot, except it's work right, 432 00:25:44,800 --> 00:25:48,919 Speaker 1: it's w R k R I O T. Yeah. This 433 00:25:49,000 --> 00:25:52,240 Speaker 1: was a company that changed names three times very quickly 434 00:25:52,280 --> 00:25:55,200 Speaker 1: in a matter of weeks. Actually, a man named Isaac 435 00:25:55,320 --> 00:25:58,840 Speaker 1: Choi founded the company, which was a job recruiting platform, 436 00:25:59,400 --> 00:26:01,960 Speaker 1: essentially a place where companies and job seekers could find 437 00:26:01,960 --> 00:26:04,719 Speaker 1: a good match you could post jobs, you could seek jobs. 438 00:26:04,760 --> 00:26:07,080 Speaker 1: That kind of thing, At least that's what it was 439 00:26:07,119 --> 00:26:11,159 Speaker 1: supposed to be. Isaac Choi positioned himself as a graduate 440 00:26:11,240 --> 00:26:14,000 Speaker 1: of the Stern School of Business at New York University, 441 00:26:14,160 --> 00:26:16,679 Speaker 1: and that prior to founding work Riot, he was an 442 00:26:16,720 --> 00:26:20,600 Speaker 1: analyst at JP Morgan for four years. Both of those 443 00:26:20,640 --> 00:26:24,920 Speaker 1: claims would be disputed by the respective organizations later on, 444 00:26:25,160 --> 00:26:28,440 Speaker 1: indicating that Mr Choi was fabricating his resume in an 445 00:26:28,440 --> 00:26:33,360 Speaker 1: attempt to manufacture credibility. Choi claimed to have raised investment 446 00:26:33,400 --> 00:26:36,959 Speaker 1: funds for work Riot through private investors, rather than seeking 447 00:26:36,960 --> 00:26:40,000 Speaker 1: out a formal series of funding or a venture capital 448 00:26:40,080 --> 00:26:44,520 Speaker 1: firm for support. The company began hiring on employees, many 449 00:26:44,560 --> 00:26:48,560 Speaker 1: of them Chinese citizens in America on work visas, which 450 00:26:48,600 --> 00:26:53,919 Speaker 1: will later make this story particularly upsetting. One employee, Penny Kim, 451 00:26:54,440 --> 00:26:57,240 Speaker 1: was hired on to be the head of marketing. Kim 452 00:26:57,240 --> 00:27:00,760 Speaker 1: would later write a piece about her experiences on medium, 453 00:27:00,960 --> 00:27:03,000 Speaker 1: though at the time she changed the names of the 454 00:27:03,160 --> 00:27:07,080 Speaker 1: people and the company in an effort to quote protect 455 00:27:07,080 --> 00:27:11,080 Speaker 1: the innocent and the guilty end quote. Later she would 456 00:27:11,080 --> 00:27:13,439 Speaker 1: confirm that the company she was writing about was in 457 00:27:13,480 --> 00:27:18,520 Speaker 1: fact work Riot. So what the heck happened. In this case, 458 00:27:18,840 --> 00:27:24,000 Speaker 1: the business leader was defrauding his employees. Kim was told 459 00:27:24,000 --> 00:27:26,560 Speaker 1: that she would have a budget of four million dollars 460 00:27:26,560 --> 00:27:29,560 Speaker 1: to make a marketing plan, so she began to put 461 00:27:29,560 --> 00:27:32,360 Speaker 1: one together, which included the push for the new name 462 00:27:32,400 --> 00:27:35,480 Speaker 1: for the company, because the previous one was quote not 463 00:27:35,960 --> 00:27:38,760 Speaker 1: s e O friendly end quote. So this was when 464 00:27:38,840 --> 00:27:42,680 Speaker 1: it was still one four dot one and the name 465 00:27:42,680 --> 00:27:45,639 Speaker 1: would change to job Sonic, which Kim said was not 466 00:27:45,760 --> 00:27:49,080 Speaker 1: her choice, but one of the other business leaders pushed it. 467 00:27:49,840 --> 00:27:53,200 Speaker 1: She wrote that she would find out later that her 468 00:27:53,400 --> 00:27:58,000 Speaker 1: four million dollar plan was meaningless because it was dependent 469 00:27:58,080 --> 00:28:00,680 Speaker 1: upon that budget of four million dollars, and it turned 470 00:28:00,680 --> 00:28:04,119 Speaker 1: out there was no four million dollar budget to be 471 00:28:04,200 --> 00:28:07,760 Speaker 1: found for the whole company, let alone for the marketing department. 472 00:28:08,400 --> 00:28:12,280 Speaker 1: Kim wrote that the CEO that being Choi was hiring 473 00:28:12,320 --> 00:28:15,880 Speaker 1: on people who had questionable applicable experience for the job 474 00:28:15,920 --> 00:28:19,800 Speaker 1: at hand, especially in the leadership team, and she said 475 00:28:19,840 --> 00:28:23,200 Speaker 1: that even the job at hand itself was poorly defined. 476 00:28:23,600 --> 00:28:27,240 Speaker 1: She also wrote about going along on investor meetings, something 477 00:28:27,320 --> 00:28:31,600 Speaker 1: she was curious about because she wanted to know what 478 00:28:31,840 --> 00:28:34,840 Speaker 1: was going on with having to get investors that the 479 00:28:34,960 --> 00:28:38,480 Speaker 1: claim was that the company was already funded, so why 480 00:28:38,480 --> 00:28:40,840 Speaker 1: would you need to go talk to investors so early. 481 00:28:41,400 --> 00:28:45,840 Speaker 1: At those meetings, Kim witnessed Choi talking more about himself 482 00:28:46,320 --> 00:28:49,640 Speaker 1: than the company. He was really selling his own qualifications 483 00:28:49,680 --> 00:28:52,240 Speaker 1: in an effort to try and get people to buy 484 00:28:52,240 --> 00:28:55,280 Speaker 1: into him rather than to buy into an idea for 485 00:28:55,320 --> 00:28:59,640 Speaker 1: a business. He also consistently failed to provide answers to 486 00:29:00,000 --> 00:29:02,920 Speaker 1: important questions, you know, questions like how much are you 487 00:29:03,000 --> 00:29:06,040 Speaker 1: bringing in versus how much are you spending. Turns out 488 00:29:06,240 --> 00:29:10,320 Speaker 1: investors are very curious about the answers to questions like that. 489 00:29:11,080 --> 00:29:14,200 Speaker 1: Kim also mentioned that her first paycheck was not a 490 00:29:14,240 --> 00:29:17,480 Speaker 1: normal one. It was a cashier's check with no PA 491 00:29:17,560 --> 00:29:21,320 Speaker 1: st up. Now, apparently, leading up to her being signed 492 00:29:21,360 --> 00:29:25,960 Speaker 1: on as the marketing director, a DP was handling payroll, 493 00:29:26,120 --> 00:29:28,680 Speaker 1: and that was an important step because one of the 494 00:29:28,760 --> 00:29:32,600 Speaker 1: things a DP would do would be to file paperwork 495 00:29:32,680 --> 00:29:36,120 Speaker 1: that showed those in the country who were on work 496 00:29:36,200 --> 00:29:39,840 Speaker 1: visas were actually employed, so the government could say, all right, 497 00:29:40,040 --> 00:29:43,880 Speaker 1: you're on a work visa. We received the notification from 498 00:29:43,960 --> 00:29:48,040 Speaker 1: a DP that you were paid for that period. Everything's cool. Well, 499 00:29:48,160 --> 00:29:51,760 Speaker 1: without a DP there, that was not happening, and that 500 00:29:51,800 --> 00:29:55,120 Speaker 1: meant that the visas might not be considered valid, and 501 00:29:55,280 --> 00:29:57,200 Speaker 1: that would mean that people would be in danger of 502 00:29:57,240 --> 00:30:01,080 Speaker 1: having those visas revoked and they would be sent back home. Worse, 503 00:30:01,480 --> 00:30:05,800 Speaker 1: Kim noted that while she received a paycheck, most people didn't, 504 00:30:06,240 --> 00:30:08,920 Speaker 1: and this indicated that there had to be a big 505 00:30:09,000 --> 00:30:12,960 Speaker 1: cash flow problem at the company. Kim also related how 506 00:30:13,000 --> 00:30:16,320 Speaker 1: an employee in business development revealed that he had lent 507 00:30:16,800 --> 00:30:21,040 Speaker 1: fifty thousand dollars of his own money in savings, his 508 00:30:21,160 --> 00:30:25,360 Speaker 1: life savings, to the CEO of the company, something that 509 00:30:25,440 --> 00:30:29,280 Speaker 1: was absolutely a red flag. Heck, that's that's not even 510 00:30:29,320 --> 00:30:34,880 Speaker 1: a red flag. That's like an active, actual emergency. Later, still, 511 00:30:35,120 --> 00:30:39,360 Speaker 1: after more missed payments, Choice and out a message claiming 512 00:30:39,400 --> 00:30:42,600 Speaker 1: that payroll would be met because he included a screenshot 513 00:30:42,640 --> 00:30:47,200 Speaker 1: of a supposed Wells Fargo money transfer into the corporate accounts. 514 00:30:47,800 --> 00:30:51,840 Speaker 1: Only it wasn't legit. It was an altered image. In fact, 515 00:30:52,000 --> 00:30:53,920 Speaker 1: it was an altered image of one that you can 516 00:30:53,960 --> 00:30:56,480 Speaker 1: find just by doing a Google image search for a 517 00:30:56,520 --> 00:31:01,080 Speaker 1: Wells Fargo transfer. Because Kim did that it, she did 518 00:31:01,080 --> 00:31:04,920 Speaker 1: that Google image search and found the exact one that 519 00:31:05,080 --> 00:31:07,840 Speaker 1: Choi had taken and done a little tiny bit of 520 00:31:07,880 --> 00:31:11,280 Speaker 1: photo shopping to change, but he wasn't even that careful. 521 00:31:11,320 --> 00:31:15,080 Speaker 1: There were entire sections of that image that indicated that 522 00:31:15,160 --> 00:31:18,760 Speaker 1: it was much, you know, much older than what Roi 523 00:31:18,880 --> 00:31:22,120 Speaker 1: was saying. When there's a copyright notice that ends in 524 00:31:22,200 --> 00:31:26,160 Speaker 1: around two thousand fourteen and it's many years after two fourteen, 525 00:31:26,560 --> 00:31:30,080 Speaker 1: not a good sign. Kim would go on to file 526 00:31:30,400 --> 00:31:35,200 Speaker 1: a wage dispute claim and then Troy fired her. So 527 00:31:35,560 --> 00:31:40,000 Speaker 1: that wasn't the smartest thing because obviously, as an employee, 528 00:31:40,000 --> 00:31:43,520 Speaker 1: you could then pursue legal action against your employer. So 529 00:31:43,560 --> 00:31:46,800 Speaker 1: she wrote the piece in medium and that prompted an 530 00:31:46,800 --> 00:31:50,760 Speaker 1: investigation by the FBI, and by then job Sonic had 531 00:31:50,800 --> 00:31:53,720 Speaker 1: become work Riot, but the Shenanigans were still the same. 532 00:31:54,280 --> 00:31:58,040 Speaker 1: Choi would be indicted in two thousand seventeen for defrauding employees. 533 00:31:58,400 --> 00:32:01,320 Speaker 1: He pled guilty and twenty eight to the charges, and 534 00:32:01,360 --> 00:32:05,040 Speaker 1: he was sentenced to time served, meaning he didn't go 535 00:32:05,080 --> 00:32:08,880 Speaker 1: to prison, and a fine of less than one dollars. 536 00:32:09,160 --> 00:32:12,000 Speaker 1: The company was no more, and I do feel awful 537 00:32:12,080 --> 00:32:14,600 Speaker 1: for all those employees who were working in good faith 538 00:32:14,640 --> 00:32:18,000 Speaker 1: for a company that was no more than a facade, 539 00:32:18,440 --> 00:32:22,240 Speaker 1: particularly those employees who were in the country on work visas. 540 00:32:22,800 --> 00:32:26,320 Speaker 1: They were all true victims of this scam. It's one 541 00:32:26,320 --> 00:32:28,479 Speaker 1: of those cases where you know, you point to the 542 00:32:28,480 --> 00:32:30,680 Speaker 1: target of the scam and it tends to be the 543 00:32:30,760 --> 00:32:34,200 Speaker 1: employees more than the potential customers or even the investors. 544 00:32:35,080 --> 00:32:38,680 Speaker 1: That's that's not cool. All right, Well, we're gonna take 545 00:32:38,760 --> 00:32:41,200 Speaker 1: another quick break, and when we come back, I'll talk 546 00:32:41,240 --> 00:32:44,360 Speaker 1: about the money behind the money and how that can 547 00:32:44,400 --> 00:32:47,840 Speaker 1: be hinky as well. But first let's take this quick break. 548 00:32:55,320 --> 00:32:58,200 Speaker 1: I'll wrap up with a couple of companies that weren't 549 00:32:58,240 --> 00:33:02,920 Speaker 1: so much startups as they were a venture capital investment company. Now, 550 00:33:02,960 --> 00:33:06,680 Speaker 1: these were supposed to be all about funding startups, and 551 00:33:06,760 --> 00:33:08,920 Speaker 1: the first one I want to talk about was called 552 00:33:08,960 --> 00:33:12,640 Speaker 1: the Rothenberg Ventures, and it's a story that would likely 553 00:33:12,720 --> 00:33:16,240 Speaker 1: make a movie akin to something like Wolf of Wall Street. 554 00:33:16,960 --> 00:33:19,040 Speaker 1: So at the heart of this story is the founder 555 00:33:19,040 --> 00:33:22,840 Speaker 1: of the company, Mike Rothenberg. He's a young guy. He's 556 00:33:22,840 --> 00:33:26,600 Speaker 1: in his mid thirties and back in twelve he founded 557 00:33:26,640 --> 00:33:30,160 Speaker 1: the VC company by raising up cash from his friends, 558 00:33:30,200 --> 00:33:33,880 Speaker 1: his family, and some colleagues. He had business degrees from 559 00:33:33,920 --> 00:33:38,400 Speaker 1: Stanford and Harvard under his belt legit ones he was charismatic, 560 00:33:38,480 --> 00:33:41,480 Speaker 1: he was an effective salesman, and he was able to 561 00:33:41,520 --> 00:33:44,760 Speaker 1: get this venture capital company off the ground. This was 562 00:33:44,800 --> 00:33:49,200 Speaker 1: particularly impressive because Rothenberg himself didn't come from money, so 563 00:33:49,240 --> 00:33:52,640 Speaker 1: this isn't the story of a rich person calling up 564 00:33:52,680 --> 00:33:56,000 Speaker 1: all his rich friends so that they can all become 565 00:33:56,000 --> 00:34:00,240 Speaker 1: more rich. Rothenberg raised around five million dollars for his 566 00:34:00,360 --> 00:34:03,400 Speaker 1: VC firm, which was meant to provide seed money for 567 00:34:03,520 --> 00:34:09,080 Speaker 1: new startups. Just two years after launching the venture capital company, 568 00:34:09,120 --> 00:34:13,360 Speaker 1: it spun off a starter accelerator called River, which focused 569 00:34:13,360 --> 00:34:17,480 Speaker 1: on companies related to virtual reality. Rothenberg Ventures and River 570 00:34:17,640 --> 00:34:20,840 Speaker 1: both invested early in a lot of startups, including a 571 00:34:20,840 --> 00:34:25,560 Speaker 1: few that would see some pretty big subsequent investment rounds. 572 00:34:25,560 --> 00:34:29,080 Speaker 1: So things were going pretty well. But Rothenberg was also 573 00:34:29,120 --> 00:34:32,920 Speaker 1: getting into the habit of spending lavishly, sometimes in an 574 00:34:32,960 --> 00:34:37,320 Speaker 1: effort to attract more investors and limited partners. He famously 575 00:34:37,400 --> 00:34:41,960 Speaker 1: hired professional race car driver Collect Davis to appear at 576 00:34:42,320 --> 00:34:46,359 Speaker 1: various events complete with a race car, which cost a 577 00:34:46,360 --> 00:34:48,839 Speaker 1: lot of money both for her and for shipping the 578 00:34:48,840 --> 00:34:52,360 Speaker 1: car around. He secured a suite at the Super Bowl 579 00:34:52,440 --> 00:34:55,759 Speaker 1: to wine and dine prospective partners. He spent a lot 580 00:34:55,800 --> 00:34:59,279 Speaker 1: in himself too. He hired personal drivers, he hired a 581 00:34:59,320 --> 00:35:04,400 Speaker 1: lot of personal assistance, he flew on a private airline 582 00:35:04,400 --> 00:35:09,360 Speaker 1: of subscription airline company, and generally he spent way more 583 00:35:09,440 --> 00:35:13,120 Speaker 1: than what seemed appropriate or heck, even possible for a 584 00:35:13,239 --> 00:35:17,440 Speaker 1: VC company of such modest size as Rothenberg Ventures. In 585 00:35:17,480 --> 00:35:20,600 Speaker 1: other words, people started to say, how is this company 586 00:35:20,640 --> 00:35:24,240 Speaker 1: making enough money for him to be spending this much? 587 00:35:24,880 --> 00:35:28,120 Speaker 1: So in twentus sixteen, the cracks began to show. A 588 00:35:28,120 --> 00:35:31,840 Speaker 1: ton of the leadership team at Rothenberg Ventures jumped ship 589 00:35:31,920 --> 00:35:35,320 Speaker 1: in a matter of months. They included the director of finance, 590 00:35:35,680 --> 00:35:39,600 Speaker 1: the manager of the San Francisco office, the chief revenue officer, 591 00:35:39,760 --> 00:35:43,880 Speaker 1: the chief financial officer, the general manager, and more. And 592 00:35:43,920 --> 00:35:48,120 Speaker 1: the precipitating event that very likely led to that mass 593 00:35:48,239 --> 00:35:51,880 Speaker 1: exodus of leadership was that an employee had blown the 594 00:35:51,880 --> 00:35:55,680 Speaker 1: whistle on what appeared to be fraud. The company subsequently 595 00:35:55,800 --> 00:36:00,840 Speaker 1: fired that employee, who then sued the company. The SEC 596 00:36:01,280 --> 00:36:05,319 Speaker 1: and the U. S. Department of Justice conducted investigations and 597 00:36:05,360 --> 00:36:09,839 Speaker 1: found that Mike Rothenberg had been siphoning money from investors 598 00:36:10,280 --> 00:36:13,720 Speaker 1: and putting it directly into his own pockets. The SEC 599 00:36:14,000 --> 00:36:17,080 Speaker 1: brought a civil lawsuit against Rothenburg, but the d o 600 00:36:17,239 --> 00:36:22,320 Speaker 1: J brought to criminal wire fraud charges, two charges alleging 601 00:36:22,360 --> 00:36:26,200 Speaker 1: he had made false bank statements, and money laundering charges 602 00:36:26,239 --> 00:36:30,000 Speaker 1: against him. Rothenberg lost the sec case and was ordered 603 00:36:30,040 --> 00:36:33,880 Speaker 1: to pay thirty one million dollars, and then he also 604 00:36:33,960 --> 00:36:37,480 Speaker 1: agreed to a ban from working in the securities industry, 605 00:36:37,520 --> 00:36:41,400 Speaker 1: with the possibility of appealing that ban after five years. 606 00:36:42,080 --> 00:36:45,320 Speaker 1: The d o j's wire fraud and false statement charges 607 00:36:45,640 --> 00:36:48,440 Speaker 1: brought with them a maximum sentence of thirty years in 608 00:36:48,480 --> 00:36:51,480 Speaker 1: prison each and remember there were four of those charges, 609 00:36:52,320 --> 00:36:56,000 Speaker 1: plus a million dollar fine. The money laundering charges could 610 00:36:56,040 --> 00:36:58,719 Speaker 1: result in another sentence of up to ten years and 611 00:36:58,760 --> 00:37:02,319 Speaker 1: a fine twice the amount of money laundered if he 612 00:37:02,360 --> 00:37:05,840 Speaker 1: were convicted. Now, the latest I've seen about Rothenburg dates 613 00:37:05,880 --> 00:37:08,440 Speaker 1: to the summer of twenty twenty. The trial had not 614 00:37:08,520 --> 00:37:10,680 Speaker 1: yet taken place. Then I suspect the trial has still 615 00:37:10,719 --> 00:37:14,359 Speaker 1: not taken place. I didn't dig deep enough down into 616 00:37:14,400 --> 00:37:17,240 Speaker 1: the court system to find out when the prospective trial 617 00:37:17,400 --> 00:37:21,400 Speaker 1: is going to take place. And our final entry is 618 00:37:21,480 --> 00:37:25,040 Speaker 1: a fake venture capital firm that has been used to 619 00:37:25,080 --> 00:37:29,239 Speaker 1: steal money from investors twice. So let's talk about the 620 00:37:29,400 --> 00:37:32,960 Speaker 1: first time around, and m I T graduate named Albert K. 621 00:37:33,280 --> 00:37:38,080 Speaker 1: Hugh founded a group of four management companies which the SEC. 622 00:37:38,800 --> 00:37:41,239 Speaker 1: So you know, the story is not gonna go well 623 00:37:41,280 --> 00:37:45,040 Speaker 1: if the SEC is involved. The SEC collectively refers to 624 00:37:45,080 --> 00:37:48,600 Speaker 1: as the Assinqua Managers. The general name I see used 625 00:37:48,600 --> 00:37:50,680 Speaker 1: most of the time to refer to whose scam is 626 00:37:50,719 --> 00:37:55,040 Speaker 1: as Sinqua Ventures, who positioned the company as a group 627 00:37:55,040 --> 00:37:59,120 Speaker 1: of hedge funds that would invest in various startups and 628 00:37:59,280 --> 00:38:04,200 Speaker 1: give out huge dividends as a result, who convinced a 629 00:38:04,280 --> 00:38:07,800 Speaker 1: small group of investors to put about five million dollars 630 00:38:07,920 --> 00:38:11,279 Speaker 1: into the company, and two thousand five who said that 631 00:38:11,440 --> 00:38:15,560 Speaker 1: due to some weird tax and privacy reasons, he needed 632 00:38:15,600 --> 00:38:19,360 Speaker 1: to relocate his company to Singapore, which is not a 633 00:38:19,400 --> 00:38:23,240 Speaker 1: great sign. An investigation into who revealed that the money 634 00:38:23,560 --> 00:38:26,759 Speaker 1: wasn't going into hedge funds like he had claimed, but 635 00:38:26,880 --> 00:38:32,000 Speaker 1: that who had been misappropriating fund assets rather than investing 636 00:38:32,040 --> 00:38:34,919 Speaker 1: the money as promised. That's a direct quote from an 637 00:38:35,000 --> 00:38:39,080 Speaker 1: SEC filing. Now, essentially, he was claiming that investors were 638 00:38:39,080 --> 00:38:41,680 Speaker 1: going to see these high returns and instead he was 639 00:38:41,719 --> 00:38:44,560 Speaker 1: pocketing the money, and it kind of sounds like he 640 00:38:44,640 --> 00:38:48,040 Speaker 1: was about to pursue a Ponzi scheme, only he didn't 641 00:38:48,080 --> 00:38:51,520 Speaker 1: follow up with subsequent rounds of investments. He just kept 642 00:38:51,560 --> 00:38:56,000 Speaker 1: all the money. Investors eventually started asking for their money back, 643 00:38:56,440 --> 00:39:01,000 Speaker 1: and Who made himself increasingly scarce, refusing to answer demands. 644 00:39:01,600 --> 00:39:04,520 Speaker 1: He was essentially in hiding in Hong Kong when he 645 00:39:04,600 --> 00:39:07,759 Speaker 1: was arrested and then extradited to stand trial in the 646 00:39:07,840 --> 00:39:11,960 Speaker 1: United States. Who was indicted and tried on seven charges 647 00:39:12,000 --> 00:39:15,120 Speaker 1: of wire fraud, and he was found guilty on all 648 00:39:15,280 --> 00:39:18,799 Speaker 1: seven charges. Who received a sentence of twelve years in 649 00:39:18,840 --> 00:39:23,279 Speaker 1: prison on June twentieve. He would serve several years in 650 00:39:23,360 --> 00:39:28,640 Speaker 1: a minimum security prison. He was, however, released in ten However, 651 00:39:29,080 --> 00:39:32,680 Speaker 1: in the meantime between when he was sent to prison 652 00:39:32,719 --> 00:39:35,560 Speaker 1: in twenty twelve and when he got out in twenty nineteen, 653 00:39:36,040 --> 00:39:42,640 Speaker 1: something really strange happened in twenties sixteen asinqua ventures returned. 654 00:39:43,200 --> 00:39:46,920 Speaker 1: Who was not mentioned at all, which really isn't surprising 655 00:39:47,320 --> 00:39:50,920 Speaker 1: and he certainly couldn't have been directly involved. He was 656 00:39:50,960 --> 00:39:53,760 Speaker 1: in prison and he didn't have any access to the internet. 657 00:39:54,000 --> 00:39:57,880 Speaker 1: He could send emails to a previously approved list of 658 00:39:57,920 --> 00:40:01,560 Speaker 1: recipients and they had to agree to accept email from 659 00:40:01,680 --> 00:40:04,240 Speaker 1: someone who was in prison, but that was the extent 660 00:40:04,280 --> 00:40:07,800 Speaker 1: of it. He couldn't do any other Internet activities. However, 661 00:40:07,840 --> 00:40:10,520 Speaker 1: The company claimed to be a venture capital firm all 662 00:40:10,560 --> 00:40:14,520 Speaker 1: the same with a Northern California office address. The new 663 00:40:14,560 --> 00:40:18,880 Speaker 1: Assinqua Ventures included two businesses, one that would supposedly invest 664 00:40:18,960 --> 00:40:23,720 Speaker 1: money into quote middle market opportunities end Quote, and another 665 00:40:23,840 --> 00:40:28,120 Speaker 1: financial advisor service that could help facilitate really big corporate moves, 666 00:40:28,200 --> 00:40:31,720 Speaker 1: like stuff like mergers and acquisitions. The old as Sinqua 667 00:40:31,880 --> 00:40:35,319 Speaker 1: Ventures u r L came back into use, though with 668 00:40:35,400 --> 00:40:38,680 Speaker 1: a very different website from the original incarnation of a 669 00:40:38,800 --> 00:40:43,000 Speaker 1: sinqua The new Assinqua Ventures published a few press releases 670 00:40:43,120 --> 00:40:45,839 Speaker 1: and sent them down the pipeline so that they went 671 00:40:45,880 --> 00:40:50,120 Speaker 1: to pr Newswire, which carried the releases, which then got 672 00:40:50,160 --> 00:40:53,719 Speaker 1: picked up by various media outlets. By the way, this 673 00:40:53,800 --> 00:40:56,399 Speaker 1: is also something that we should all be aware of 674 00:40:56,440 --> 00:41:01,000 Speaker 1: that press releases don't necessarily reflect the true That's why 675 00:41:01,040 --> 00:41:05,160 Speaker 1: reporting just on press releases is a terrible idea without 676 00:41:05,200 --> 00:41:08,840 Speaker 1: doing any further investigation, because there are instances of people 677 00:41:09,080 --> 00:41:14,080 Speaker 1: releasing false documents as a press release and having that 678 00:41:14,160 --> 00:41:17,839 Speaker 1: get picked up by the press. Wire and thus distributed 679 00:41:17,880 --> 00:41:20,760 Speaker 1: by various media outlets. So if you do a search 680 00:41:20,840 --> 00:41:23,840 Speaker 1: for the name A sinqua Ventures, you might see a 681 00:41:23,880 --> 00:41:27,120 Speaker 1: few press releases from six and Some of the press 682 00:41:27,160 --> 00:41:31,680 Speaker 1: releases mentioned members of the senior management team, like Steven Adler, 683 00:41:31,960 --> 00:41:34,880 Speaker 1: who apparently wasn't the Steven Adler who was drummer for 684 00:41:34,920 --> 00:41:37,759 Speaker 1: Guns and Roses, though that joke is kind of a 685 00:41:37,800 --> 00:41:41,360 Speaker 1: stretch anyway. The Adler listed in the releases spells Stephen 686 00:41:41,520 --> 00:41:44,760 Speaker 1: with a pH, whereas the drummer at Guns and Roses 687 00:41:45,080 --> 00:41:47,000 Speaker 1: spells it with a V. But I still had to 688 00:41:47,600 --> 00:41:50,520 Speaker 1: stick a joke in there. Adler also had a LinkedIn 689 00:41:50,640 --> 00:41:54,280 Speaker 1: page which sent out connection requests to a pretty wide 690 00:41:54,440 --> 00:41:58,319 Speaker 1: net of different business leaders. One of those requests went 691 00:41:58,400 --> 00:42:03,000 Speaker 1: to an executive recruiter named Marty McMahon who thought something 692 00:42:03,120 --> 00:42:06,880 Speaker 1: was hinky about that profile, so he performed a reverse 693 00:42:07,000 --> 00:42:10,480 Speaker 1: image search on the profile photo, which brought up a 694 00:42:10,600 --> 00:42:14,240 Speaker 1: hit for a head shot for a totally different person, 695 00:42:14,600 --> 00:42:18,040 Speaker 1: a real estate agent in San Diego named Dan Becker, 696 00:42:18,400 --> 00:42:23,880 Speaker 1: same picture, different guy. So when contacted by McMahon, Becker 697 00:42:24,040 --> 00:42:26,440 Speaker 1: was astonished to find his photo had been used for 698 00:42:26,480 --> 00:42:30,400 Speaker 1: a bogus LinkedIn profile. He had no connection to it. Obviously, 699 00:42:30,800 --> 00:42:34,239 Speaker 1: strange things were afoot at the circle K. This was 700 00:42:34,280 --> 00:42:38,160 Speaker 1: reinforced when McMahon repeated the process on a LinkedIn profile 701 00:42:38,200 --> 00:42:42,160 Speaker 1: of a different supposed a Sinqua executive named Michael Reid, 702 00:42:43,000 --> 00:42:45,600 Speaker 1: not the baseball player. I get the feeling that the 703 00:42:45,600 --> 00:42:50,480 Speaker 1: as Sinqua scammers were just copy and pasting content from 704 00:42:50,480 --> 00:42:56,480 Speaker 1: all over the web to fill out their supposed corporate website. Anyway, 705 00:42:56,520 --> 00:42:59,880 Speaker 1: that reverse search of that head shot pulled up a 706 00:43:00,000 --> 00:43:03,880 Speaker 1: another had shot of another San Diego based real estate agent, 707 00:43:04,160 --> 00:43:07,200 Speaker 1: a guy named Will Fagan, who actually sometimes works with 708 00:43:07,320 --> 00:43:09,840 Speaker 1: Dan Becker, the guy whose face was being used for 709 00:43:09,880 --> 00:43:15,400 Speaker 1: Steven Adler. Fortune magazine investigated the new Assinqua and published 710 00:43:15,680 --> 00:43:19,280 Speaker 1: a great piece about it titled the Venture capital Firm 711 00:43:19,400 --> 00:43:23,000 Speaker 1: that Wasn't There. The magazine pointed out that the press 712 00:43:23,040 --> 00:43:27,680 Speaker 1: releases were filled with information that was unverifiable. Dan Primac, 713 00:43:27,840 --> 00:43:31,520 Speaker 1: who is the writer of that piece, wrote about contacting 714 00:43:31,560 --> 00:43:36,000 Speaker 1: the SEC to find out if this Assinqua Ventures firm 715 00:43:36,360 --> 00:43:39,600 Speaker 1: was registered with the SEC, and it wasn't. If it 716 00:43:39,680 --> 00:43:43,560 Speaker 1: were a legitimate business, it certainly should have been registered. 717 00:43:44,080 --> 00:43:46,879 Speaker 1: One press release claimed that the company had held an 718 00:43:46,920 --> 00:43:51,239 Speaker 1: Investment Series fundraising round and raised a hundred twenty five 719 00:43:51,320 --> 00:43:55,080 Speaker 1: million dollars. But a company of that size would absolutely 720 00:43:55,120 --> 00:43:58,719 Speaker 1: be required to register with the SEC. But nope, there 721 00:43:58,760 --> 00:44:03,200 Speaker 1: was nothing there. Furthermore, several of the executive bios listed 722 00:44:03,239 --> 00:44:06,000 Speaker 1: in the management team page of the company's website were 723 00:44:06,080 --> 00:44:11,000 Speaker 1: clearly plagiarized. One such bio for managing director Peter Arnold 724 00:44:11,280 --> 00:44:14,160 Speaker 1: turned out to be lifted from the late venture capitalist 725 00:44:14,280 --> 00:44:19,760 Speaker 1: and reality TV star Russell Armstrong's bio. Not exactly subtle 726 00:44:20,400 --> 00:44:24,800 Speaker 1: Prime X piece pretty much gutted a Sinqua. He detailed 727 00:44:24,840 --> 00:44:27,960 Speaker 1: how he got into email contact with the supposed employee 728 00:44:27,960 --> 00:44:31,360 Speaker 1: of the company and how he received misinformation in return. 729 00:44:31,840 --> 00:44:34,680 Speaker 1: He hypothesized that the venture might be run by one 730 00:44:34,719 --> 00:44:38,320 Speaker 1: of Hugh's associates in an attempt to get another scam going. 731 00:44:38,920 --> 00:44:44,440 Speaker 1: The piece published in September. Shortly afterward, the Assinqua website 732 00:44:44,480 --> 00:44:48,640 Speaker 1: was offline and emails sent to Asinqua addresses bounced back 733 00:44:48,680 --> 00:44:53,239 Speaker 1: as undeliverable. So it's quite possible that the journalistic investigation 734 00:44:53,320 --> 00:44:57,000 Speaker 1: helped shut down this particular instance of this particular scam, 735 00:44:57,040 --> 00:45:00,600 Speaker 1: possibly before they could actually scam anyone out of any money. 736 00:45:00,640 --> 00:45:05,480 Speaker 1: That million dollar investment round might be just pure fiction. 737 00:45:06,120 --> 00:45:09,279 Speaker 1: So I think the moral of this story is that 738 00:45:09,960 --> 00:45:14,399 Speaker 1: investors need to be careful, as do prospective employees, not 739 00:45:14,560 --> 00:45:18,440 Speaker 1: just in the startups that interest them, but also in 740 00:45:18,480 --> 00:45:23,239 Speaker 1: the very venture capital firms that aggregate investments. Investments are 741 00:45:23,400 --> 00:45:26,600 Speaker 1: inherently risky to some degree. You don't know if the 742 00:45:26,600 --> 00:45:31,040 Speaker 1: startup is going to succeed, and that success depends on 743 00:45:31,080 --> 00:45:34,440 Speaker 1: a lot of different factors to really fall in place, 744 00:45:34,480 --> 00:45:37,799 Speaker 1: from having the right leadership to having a solid business plan, 745 00:45:38,160 --> 00:45:41,080 Speaker 1: to offering a product that people actually want or need, 746 00:45:41,440 --> 00:45:45,479 Speaker 1: and more. Some of the startups will become big, though 747 00:45:45,560 --> 00:45:48,400 Speaker 1: sometimes that's due to multiple investment rounds rather than the 748 00:45:48,440 --> 00:45:52,680 Speaker 1: company is actually becoming profitable. But the various big stories 749 00:45:52,960 --> 00:45:55,920 Speaker 1: tend to feed into that fear of missing out the 750 00:45:55,960 --> 00:45:59,840 Speaker 1: old fomo and the money will often follow as or 751 00:46:00,000 --> 00:46:03,799 Speaker 1: realt It's just important to ask tough questions and to 752 00:46:03,840 --> 00:46:06,960 Speaker 1: be extra cautious when you're dealing with something that is 753 00:46:07,080 --> 00:46:10,640 Speaker 1: unfamiliar to you. That gap in your knowledge might be 754 00:46:10,719 --> 00:46:13,640 Speaker 1: just the thing that causes you to make a mistake. 755 00:46:14,239 --> 00:46:16,480 Speaker 1: Next thing, you know, the person you trusted with your 756 00:46:16,520 --> 00:46:20,960 Speaker 1: money is facing fraud charges in court, not a great experience, 757 00:46:21,560 --> 00:46:23,920 Speaker 1: But you know what is a great experience letting me 758 00:46:24,000 --> 00:46:25,919 Speaker 1: know what it is you would like me to cover next. 759 00:46:25,960 --> 00:46:29,239 Speaker 1: I've gotten some messages recently so planned to hear some 760 00:46:29,360 --> 00:46:32,800 Speaker 1: episodes coming up in the near future about things like discord. 761 00:46:33,320 --> 00:46:35,959 Speaker 1: But if you have suggestions for topics that you would 762 00:46:35,960 --> 00:46:38,680 Speaker 1: like me to cover on a future episode of tech Stuff, 763 00:46:38,920 --> 00:46:40,759 Speaker 1: you should reach out and let me know. The best 764 00:46:40,760 --> 00:46:43,360 Speaker 1: way to do that is over on Twitter. The handle 765 00:46:43,400 --> 00:46:47,520 Speaker 1: for the show is text Stuff hs W, and I'll 766 00:46:47,520 --> 00:46:55,600 Speaker 1: talk to you again really soon. Text Stuff is an 767 00:46:55,640 --> 00:46:59,320 Speaker 1: I Heart Radio production. For more podcasts from my Heart Radio, 768 00:46:59,640 --> 00:47:02,800 Speaker 1: visit the i Heart Radio app, Apple Podcasts, or wherever 769 00:47:02,920 --> 00:47:09,000 Speaker 1: you listen to your favorite shows. H