1 00:00:04,400 --> 00:00:07,760 Speaker 1: Welcome to Tech Stuff, a production from my Heart Radio. 2 00:00:12,119 --> 00:00:14,440 Speaker 1: Hey there, and welcome to tech Stuff. I'm your host, 3 00:00:14,560 --> 00:00:17,600 Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio. 4 00:00:17,640 --> 00:00:20,240 Speaker 1: And how the tech are you well, y'all. I had 5 00:00:20,360 --> 00:00:23,479 Speaker 1: intended to do a totally new episode today. I was 6 00:00:23,680 --> 00:00:26,360 Speaker 1: working on one. I've actually got a couple of different 7 00:00:26,360 --> 00:00:29,400 Speaker 1: ones that are in the process of development, but some 8 00:00:29,560 --> 00:00:35,120 Speaker 1: extenuating circumstances that I could not sidestep have have come 9 00:00:35,159 --> 00:00:37,720 Speaker 1: in and it's going to delay me and I didn't 10 00:00:37,760 --> 00:00:40,520 Speaker 1: want to go without an episode, so instead we're gonna 11 00:00:40,520 --> 00:00:43,400 Speaker 1: bring you this episode that originally published in two thousand 12 00:00:43,400 --> 00:00:45,559 Speaker 1: twenty one. I almost said last year, but that's not 13 00:00:45,560 --> 00:00:48,640 Speaker 1: true anymore, is it. I kinda remember it now. Yeah, 14 00:00:48,680 --> 00:00:52,760 Speaker 1: let's let's published January two thousand twenty one, and it's 15 00:00:52,760 --> 00:00:57,600 Speaker 1: called Startups and shut Downs because just like me, I 16 00:00:57,640 --> 00:01:00,720 Speaker 1: started up and then I had to shut down. But 17 00:01:01,440 --> 00:01:03,080 Speaker 1: you know, such as the way of things. But we'll 18 00:01:03,120 --> 00:01:05,119 Speaker 1: be back with new episodes for the rest of the week. 19 00:01:05,520 --> 00:01:09,360 Speaker 1: Looks up for Friday, which is classic, and I apologize. 20 00:01:09,480 --> 00:01:11,720 Speaker 1: Hope you're all doing well. Hope your new year is 21 00:01:11,760 --> 00:01:14,440 Speaker 1: off to a great start. Mind's a little rocky, but 22 00:01:14,560 --> 00:01:17,679 Speaker 1: we're gonna make it work, right. We're all in this together. 23 00:01:18,000 --> 00:01:19,920 Speaker 1: I believe in you, I hope you believe in me, 24 00:01:20,319 --> 00:01:25,320 Speaker 1: and I'll chat with you at the end. In a 25 00:01:25,400 --> 00:01:29,760 Speaker 1: recent episode, I talked about funzy schemes and how you 26 00:01:29,800 --> 00:01:34,200 Speaker 1: know that's an old scam that gets refreshed by enterprising 27 00:01:34,240 --> 00:01:39,600 Speaker 1: con artists every so often, with recent examples centering on cryptocurrency, 28 00:01:40,120 --> 00:01:43,360 Speaker 1: and that actually got me to thinking about startup culture 29 00:01:43,760 --> 00:01:47,600 Speaker 1: and how some startups appear to be sincere, but maybe 30 00:01:47,680 --> 00:01:50,480 Speaker 1: they're too ambitious to really work in the real world, 31 00:01:50,960 --> 00:01:53,720 Speaker 1: and some seem like maybe they were just smoking mirrors 32 00:01:53,720 --> 00:01:56,840 Speaker 1: the entire time. So today I thought we'd go through 33 00:01:57,120 --> 00:02:00,880 Speaker 1: some of those types of startups and talk about the 34 00:02:00,920 --> 00:02:04,680 Speaker 1: world of startups in technology and why it can be 35 00:02:04,760 --> 00:02:07,600 Speaker 1: so risky to invest in them. Now. There are a 36 00:02:07,600 --> 00:02:11,360 Speaker 1: lot of common elements among startups in general, not just 37 00:02:11,440 --> 00:02:14,320 Speaker 1: in tech, and a lot of what we see frustrates 38 00:02:14,360 --> 00:02:17,520 Speaker 1: me because you would think that by now people would 39 00:02:17,560 --> 00:02:20,799 Speaker 1: learn their lesson when it comes to hype machines. Right, 40 00:02:21,200 --> 00:02:23,720 Speaker 1: we should all be pretty familiar with the hype cycle, 41 00:02:24,280 --> 00:02:27,680 Speaker 1: and you would think with familiarity we would be more 42 00:02:27,720 --> 00:02:30,720 Speaker 1: resistant to it, and yet we're not, and I include myself, 43 00:02:30,720 --> 00:02:34,200 Speaker 1: and that I get caught up in hype too, even 44 00:02:34,240 --> 00:02:37,640 Speaker 1: as I recognize that there's a pattern here that just 45 00:02:37,680 --> 00:02:41,400 Speaker 1: doesn't hold up. But I guess we have enough long 46 00:02:41,480 --> 00:02:45,120 Speaker 1: shots that do pay off that keep people figuratively and 47 00:02:45,280 --> 00:02:50,800 Speaker 1: literally invested. I mean, what if the next opportunity pays 48 00:02:50,840 --> 00:02:53,440 Speaker 1: off and you didn't get in on the ground floor, 49 00:02:53,840 --> 00:02:56,760 Speaker 1: you just missed a huge payout. So I guess I 50 00:02:56,800 --> 00:03:01,200 Speaker 1: can understand the tendency, but it also enforces the general 51 00:03:01,240 --> 00:03:05,240 Speaker 1: truth that humans as a rule are really bad at 52 00:03:05,320 --> 00:03:09,560 Speaker 1: stuff like risk assessment and understanding the odds, which, hey, 53 00:03:09,639 --> 00:03:11,720 Speaker 1: you really you just have to look at the fact 54 00:03:11,800 --> 00:03:14,600 Speaker 1: that you know, lotteries are a thing to know that 55 00:03:14,600 --> 00:03:19,040 Speaker 1: that is true. There's a general philosophy among startups that 56 00:03:19,320 --> 00:03:23,800 Speaker 1: goes something like move quickly and break things, that taking 57 00:03:23,800 --> 00:03:27,200 Speaker 1: big chances is encouraged because you know, while you're more 58 00:03:27,320 --> 00:03:31,480 Speaker 1: likely going to fail, you'll learn a lot in the process, 59 00:03:31,520 --> 00:03:33,880 Speaker 1: and that means you'll actually have a better chance at 60 00:03:33,880 --> 00:03:37,200 Speaker 1: success next time. We learn a lot through failure, or 61 00:03:37,480 --> 00:03:40,720 Speaker 1: you might find that quote unquote breaking what was previously 62 00:03:40,760 --> 00:03:43,960 Speaker 1: considered to be a best practice leads to you finding 63 00:03:44,000 --> 00:03:47,320 Speaker 1: an even better way to do things, but it can 64 00:03:47,400 --> 00:03:50,760 Speaker 1: also create the perfect climate for someone to engage in 65 00:03:50,800 --> 00:03:53,640 Speaker 1: a little snake oil peddling, because in a world where 66 00:03:53,680 --> 00:03:57,840 Speaker 1: seemingly anything is possible, there's no such thing as impossible, 67 00:03:58,080 --> 00:03:59,840 Speaker 1: and that means you can get money for stuff that 68 00:04:00,120 --> 00:04:03,800 Speaker 1: just plane don't work. The current reigning champion of that 69 00:04:03,920 --> 00:04:08,880 Speaker 1: model is Theopos, which I have covered extensively in the past, 70 00:04:08,960 --> 00:04:13,400 Speaker 1: but for a quick overview, Elizabeth Holmes, Stanford dropout and 71 00:04:13,440 --> 00:04:16,520 Speaker 1: a big fan of Silicon Valley leaders like Steve Jobs, 72 00:04:16,960 --> 00:04:19,440 Speaker 1: set out to create a company centered on a new 73 00:04:19,520 --> 00:04:23,080 Speaker 1: kind of blood analysis device, and the idea is alluring. 74 00:04:23,279 --> 00:04:26,239 Speaker 1: Imagine a machine about the size of a desktop printer 75 00:04:26,760 --> 00:04:30,360 Speaker 1: that could analyze the tiniest drop of blood and run 76 00:04:30,400 --> 00:04:34,000 Speaker 1: more than a hundred fifty tests on that sample. The 77 00:04:34,080 --> 00:04:38,159 Speaker 1: machine presents a comprehensive but easy to understand report on 78 00:04:38,279 --> 00:04:42,600 Speaker 1: that sample and thus gives the administrator insight into the 79 00:04:42,640 --> 00:04:46,000 Speaker 1: patient's current state of health and also pointing out any 80 00:04:46,040 --> 00:04:48,800 Speaker 1: indicators that you know might suggest the patient should be 81 00:04:48,800 --> 00:04:53,040 Speaker 1: on the lookout for future complications. It could help patients 82 00:04:53,080 --> 00:04:56,400 Speaker 1: be more proactive and choose new lifestyle routines to live 83 00:04:56,440 --> 00:04:59,760 Speaker 1: their healthiest lives. Heck, once the cost of making the 84 00:04:59,760 --> 00:05:03,599 Speaker 1: divi ice is declined enough, it could potentially be something 85 00:05:03,640 --> 00:05:06,840 Speaker 1: the average consumer purchases for their own home, and thus 86 00:05:06,880 --> 00:05:10,480 Speaker 1: informing the average person about their own health before they 87 00:05:10,600 --> 00:05:13,560 Speaker 1: go to say their annual check up, people would make 88 00:05:13,640 --> 00:05:16,680 Speaker 1: more informed decisions about their health. They would be able 89 00:05:16,720 --> 00:05:20,040 Speaker 1: to have better conversations with healthcare providers. It would really 90 00:05:20,480 --> 00:05:24,960 Speaker 1: democratize healthcare. And that is a heck of a sales pitch, 91 00:05:25,279 --> 00:05:27,599 Speaker 1: and from the business side, it's easy to see how 92 00:05:27,680 --> 00:05:31,080 Speaker 1: it could be a freaking gold mine because the health 93 00:05:31,080 --> 00:05:36,880 Speaker 1: care industry is already a multi trillion dollar market. Holmes 94 00:05:36,960 --> 00:05:40,119 Speaker 1: was confident and she was convincing. And over the past 95 00:05:40,120 --> 00:05:42,919 Speaker 1: two decades, we've seen technology do stuff that, you know, 96 00:05:43,080 --> 00:05:46,960 Speaker 1: three decades ago would seem impossible. The Internet alone was 97 00:05:47,000 --> 00:05:49,640 Speaker 1: a huge revelation, and now we can carry a device 98 00:05:49,640 --> 00:05:52,120 Speaker 1: in our pockets that less access at wherever we are. 99 00:05:52,560 --> 00:05:55,800 Speaker 1: So it's mundane today, it's it's commonplace, But thirty years 100 00:05:55,800 --> 00:05:59,159 Speaker 1: ago it would have seemed bonkers. And so it's not 101 00:05:59,279 --> 00:06:02,919 Speaker 1: really surprised zing that investors rushed in to get in 102 00:06:02,960 --> 00:06:06,279 Speaker 1: on the ground floor of Holmes's enterprise, the return on 103 00:06:06,400 --> 00:06:09,680 Speaker 1: investment would be unbelievable. It could be as if you 104 00:06:09,720 --> 00:06:12,400 Speaker 1: were able to travel back to the mid nineties when 105 00:06:12,480 --> 00:06:15,960 Speaker 1: Apple Stock was trading below five dollars a share, and 106 00:06:16,040 --> 00:06:18,280 Speaker 1: you bought up a ton of it because you know 107 00:06:18,360 --> 00:06:20,320 Speaker 1: how much it's going to grow in the future when 108 00:06:20,320 --> 00:06:24,400 Speaker 1: Steve Jobs comes back. It helped that most investors had little, 109 00:06:24,640 --> 00:06:28,320 Speaker 1: if any understanding about the technology involved in blood analysis. 110 00:06:29,040 --> 00:06:31,640 Speaker 1: That's something that you'll remember is a red flag when 111 00:06:31,680 --> 00:06:35,080 Speaker 1: it comes to stuff like Ponzi schemes. In this case, 112 00:06:35,279 --> 00:06:38,039 Speaker 1: Fariness wasn't so much a Ponzi scheme as it was 113 00:06:38,080 --> 00:06:40,920 Speaker 1: a company centered around an idea that was just not 114 00:06:41,120 --> 00:06:46,040 Speaker 1: really realistic. More knowledgeable experts in the area of blood 115 00:06:46,040 --> 00:06:50,479 Speaker 1: analysis had warned that Holmes's goal was unattainable, that the 116 00:06:50,520 --> 00:06:53,960 Speaker 1: technology just, you know, it's not there to do something 117 00:06:54,000 --> 00:06:57,080 Speaker 1: as comprehensive as what Holmes had in mind. But the 118 00:06:57,160 --> 00:07:01,560 Speaker 1: investments just kept pouring in, and if it had just failed, 119 00:07:01,680 --> 00:07:04,680 Speaker 1: the company had just ultimately had to say, you know what, 120 00:07:04,760 --> 00:07:07,839 Speaker 1: we tried, it didn't work, We're sorry. Our story would 121 00:07:07,960 --> 00:07:09,800 Speaker 1: really just be about how a lot of people got 122 00:07:09,800 --> 00:07:13,000 Speaker 1: excited about an idea but the idea just didn't pan out. 123 00:07:13,320 --> 00:07:16,440 Speaker 1: But of course it gets worse, and that's because over 124 00:07:16,440 --> 00:07:19,360 Speaker 1: at Therapness there were a lot of shady things going on. 125 00:07:19,800 --> 00:07:23,400 Speaker 1: There were teams legitimately trying to get the technology to work, 126 00:07:23,720 --> 00:07:26,000 Speaker 1: but in the meantime, the company was playing a kind 127 00:07:26,040 --> 00:07:29,840 Speaker 1: of a shell game with investors and v i p s. So, 128 00:07:30,160 --> 00:07:33,680 Speaker 1: according to reports, when such a person came in for 129 00:07:33,800 --> 00:07:36,840 Speaker 1: a tour of the facility, they would get their finger 130 00:07:36,920 --> 00:07:39,600 Speaker 1: pricked and submit a tiny blood sample in this little 131 00:07:39,600 --> 00:07:42,880 Speaker 1: bitty capsule and that would be fed into a THEONOS machine. 132 00:07:43,200 --> 00:07:45,400 Speaker 1: But the analysis would take a couple of hours. So 133 00:07:45,440 --> 00:07:48,080 Speaker 1: instead of just you know, waiting around, the v i 134 00:07:48,080 --> 00:07:50,880 Speaker 1: p would go on a tour, maybe they'd grab lunch 135 00:07:50,960 --> 00:07:55,480 Speaker 1: with THEORONESS executives or something. Meanwhile, other staff would rush 136 00:07:55,560 --> 00:07:59,720 Speaker 1: in retrieve the blood sample from the THEONOS device diluted, 137 00:08:00,120 --> 00:08:03,440 Speaker 1: and then submit that diluted sample to a traditional blood 138 00:08:03,440 --> 00:08:07,520 Speaker 1: analysis machine that had been bought from an established company. 139 00:08:07,560 --> 00:08:10,480 Speaker 1: In other words, they were relying on devices that were 140 00:08:10,560 --> 00:08:14,320 Speaker 1: not built by Saronis to do the actual analysis. Then 141 00:08:14,400 --> 00:08:17,600 Speaker 1: they would rush the completed analysis back to the meeting room, 142 00:08:18,040 --> 00:08:20,320 Speaker 1: and then the team would behave as if the Tharonis 143 00:08:20,320 --> 00:08:23,360 Speaker 1: device had done all the work the entire time. It 144 00:08:23,400 --> 00:08:26,960 Speaker 1: was a particularly flashy version of the old Turk automaton 145 00:08:27,120 --> 00:08:29,920 Speaker 1: chess player. You know, the thing you're looking at is 146 00:08:29,920 --> 00:08:34,320 Speaker 1: not the actual thing that's doing the work. Sarais eventually 147 00:08:34,360 --> 00:08:37,640 Speaker 1: crumbled after insiders began leaking what was going on to 148 00:08:37,720 --> 00:08:42,559 Speaker 1: others and journalists began publishing expose s about the company. 149 00:08:42,720 --> 00:08:45,960 Speaker 1: Holmes is one of the executives who happens to be 150 00:08:46,120 --> 00:08:49,800 Speaker 1: waiting trial for multiple charges of fraud, and the name 151 00:08:49,920 --> 00:08:56,160 Speaker 1: Sarah nos is forever associated with words like hoax and scam. Now, 152 00:08:56,200 --> 00:08:59,400 Speaker 1: just to be clear, I don't know if it was 153 00:08:59,480 --> 00:09:02,520 Speaker 1: a scam from the beginning. I suspect that. You know, 154 00:09:02,640 --> 00:09:05,960 Speaker 1: in the very earliest days, Holmes was sincere in her 155 00:09:06,000 --> 00:09:09,040 Speaker 1: belief that she can make this work, and her engineers 156 00:09:09,200 --> 00:09:12,080 Speaker 1: certainly tried to get the technology to measure up to 157 00:09:12,120 --> 00:09:15,920 Speaker 1: the vision. But somewhere along the way people started to 158 00:09:15,960 --> 00:09:18,840 Speaker 1: fudge results or rely on alternative methods to make it 159 00:09:18,880 --> 00:09:21,840 Speaker 1: seem like things were working way better than they really were, 160 00:09:22,280 --> 00:09:26,360 Speaker 1: and once they went down that path, they were committed. Now, 161 00:09:26,559 --> 00:09:30,640 Speaker 1: other companies are legit, but the people running them might 162 00:09:30,679 --> 00:09:34,839 Speaker 1: not be, and that also is a big problem. So 163 00:09:34,880 --> 00:09:36,720 Speaker 1: it seemed to be the case with a company that 164 00:09:36,760 --> 00:09:39,520 Speaker 1: once upon a time was called Mozito, but for some 165 00:09:39,559 --> 00:09:43,640 Speaker 1: reasons that will soon become a parent now calls itself definitive. 166 00:09:44,080 --> 00:09:48,079 Speaker 1: So let's talk about what this company's purpose is beyond 167 00:09:48,360 --> 00:09:51,400 Speaker 1: making its founder a whole lot of money. The original 168 00:09:51,480 --> 00:09:54,960 Speaker 1: focus of Mozito was to do something pretty great. I 169 00:09:55,000 --> 00:09:58,080 Speaker 1: think so many of us have used mobile devices to 170 00:09:58,320 --> 00:10:01,160 Speaker 1: pay for stuff. You have some sort of digital wallet 171 00:10:01,280 --> 00:10:03,320 Speaker 1: that's tied to either a credit card or a bank 172 00:10:03,320 --> 00:10:07,080 Speaker 1: account or some other stash of cash. In a transaction, 173 00:10:07,240 --> 00:10:09,880 Speaker 1: the mobile device interacts with the merchant's point of sale 174 00:10:10,280 --> 00:10:12,400 Speaker 1: and the data zings back and forth, and soon the 175 00:10:12,440 --> 00:10:15,320 Speaker 1: appropriate amount of money goes from your stash to the 176 00:10:15,360 --> 00:10:18,440 Speaker 1: merchant stash, which is, you know, pretty simple idea. But 177 00:10:18,520 --> 00:10:22,679 Speaker 1: there's an enormous population of people who don't have bank accounts. 178 00:10:23,120 --> 00:10:26,600 Speaker 1: Mozito estimated that two and a half billion people have 179 00:10:26,800 --> 00:10:30,640 Speaker 1: access to cellular technology, but they do not have an 180 00:10:30,640 --> 00:10:34,600 Speaker 1: account with a bank or a credit union. So mobile payments, 181 00:10:34,640 --> 00:10:38,199 Speaker 1: while incredibly useful, are not within the grasp of everyone. 182 00:10:38,640 --> 00:10:40,559 Speaker 1: And so the company saw a space that it could 183 00:10:40,600 --> 00:10:44,319 Speaker 1: potentially fill creating a technology that would allow people who 184 00:10:44,320 --> 00:10:48,760 Speaker 1: are unbanked or underbanked to use mobile payments, which is 185 00:10:48,760 --> 00:10:51,800 Speaker 1: a pretty noble goal giving people a lot more options 186 00:10:51,800 --> 00:10:55,240 Speaker 1: when it comes to making transactions, and that attracted a 187 00:10:55,320 --> 00:10:58,800 Speaker 1: lot of investors, and that brings us to the company's founder. 188 00:10:59,360 --> 00:11:02,560 Speaker 1: So the found of Mozito was a guy named Michael Liberty, 189 00:11:02,679 --> 00:11:05,720 Speaker 1: whose name is pretty fitting as we're gonna see. He 190 00:11:05,840 --> 00:11:09,400 Speaker 1: first established the company in two thousand seven in Dallas, Texas. 191 00:11:09,880 --> 00:11:12,280 Speaker 1: The fact that Mozito traces its history to two thousand 192 00:11:12,320 --> 00:11:15,640 Speaker 1: seven is already pretty impressive because that's the same year 193 00:11:15,679 --> 00:11:18,280 Speaker 1: that Apple launched the iPhone, So it was a pretty 194 00:11:18,440 --> 00:11:21,760 Speaker 1: visionary move. Liberty was able to get a lot of 195 00:11:21,800 --> 00:11:25,080 Speaker 1: investors for his company, raising money in multiple rounds of 196 00:11:25,120 --> 00:11:29,560 Speaker 1: investment funding. The company relocated from Dallas to Austin, Texas 197 00:11:29,600 --> 00:11:32,960 Speaker 1: in two thousand twelve, and by two thousand seventeen, Liberty 198 00:11:33,000 --> 00:11:36,800 Speaker 1: himself would step down from the company and relocate to Florida. Essentially, 199 00:11:37,280 --> 00:11:40,400 Speaker 1: he had grown the business. He was not leading it. 200 00:11:40,559 --> 00:11:42,319 Speaker 1: He was he had founded it, but he had other 201 00:11:42,400 --> 00:11:45,839 Speaker 1: executives in charge of running the thing, and he kind 202 00:11:45,840 --> 00:11:48,040 Speaker 1: of said, all right, my work year is done, and 203 00:11:48,120 --> 00:11:52,440 Speaker 1: stepped away and went to Florida. However, investigators with the 204 00:11:52,520 --> 00:11:57,120 Speaker 1: Securities and Exchange Commission or SEC were interested in some 205 00:11:57,280 --> 00:11:59,560 Speaker 1: of those investments that were supposed to be going to 206 00:11:59,640 --> 00:12:03,120 Speaker 1: moz Do because the numbers didn't seem to add up, 207 00:12:03,400 --> 00:12:06,880 Speaker 1: and the investigation indicated that Mr Liberty had taken the 208 00:12:07,000 --> 00:12:10,600 Speaker 1: liberty of moving some of that cash around so that 209 00:12:10,600 --> 00:12:13,880 Speaker 1: would ultimately fill his own pockets rather than go to 210 00:12:14,000 --> 00:12:17,200 Speaker 1: funding the company. With most of the shenanigans taking place 211 00:12:17,240 --> 00:12:22,080 Speaker 1: between and there were signs of the shell companies all 212 00:12:22,120 --> 00:12:25,160 Speaker 1: designed to obvius skate where the money was going. There 213 00:12:25,320 --> 00:12:28,160 Speaker 1: was a practice of money laundering, which is when you 214 00:12:28,280 --> 00:12:32,480 Speaker 1: mix illegally obtained cash with cash from legitimate businesses in 215 00:12:32,480 --> 00:12:34,880 Speaker 1: an effort to hide the fact that you've got filthy 216 00:12:34,960 --> 00:12:39,040 Speaker 1: lucre on your hands. Ultimately, Liberty was charged with fraud, 217 00:12:39,440 --> 00:12:42,280 Speaker 1: with prosecutors saying he had stolen more than fifty million 218 00:12:42,320 --> 00:12:46,719 Speaker 1: dollars to fund his own millionaire lifestyle, complete with mansions 219 00:12:46,760 --> 00:12:49,960 Speaker 1: and private jets. He also served a prison sentence for 220 00:12:50,040 --> 00:12:53,520 Speaker 1: a different infraction. He pled guilty to charges that he 221 00:12:53,559 --> 00:12:56,640 Speaker 1: had violated campaign finance law in two thousand and eleven 222 00:12:57,120 --> 00:12:58,959 Speaker 1: and was sentenced to four months in prison and a 223 00:12:59,000 --> 00:13:02,680 Speaker 1: fine for one thousand dollars in and there were other 224 00:13:02,800 --> 00:13:08,120 Speaker 1: SEC investigations into his activities beyond the ones I just described. Now, 225 00:13:08,240 --> 00:13:13,400 Speaker 1: the company Mozito wasn't included in these charges. It appeared 226 00:13:13,440 --> 00:13:17,040 Speaker 1: as though everything at the company was pretty legit, but 227 00:13:17,120 --> 00:13:19,760 Speaker 1: there was a lot of turnover in the executive suite 228 00:13:19,760 --> 00:13:23,439 Speaker 1: of leadership, which probably didn't look too good to investors. 229 00:13:23,880 --> 00:13:28,120 Speaker 1: In Scott Sandlin stepped down as the CEO, and for 230 00:13:28,200 --> 00:13:32,560 Speaker 1: more than a year, Mike Love served as interim CEO, So, 231 00:13:32,600 --> 00:13:35,280 Speaker 1: in other words, this company went for more than a 232 00:13:35,360 --> 00:13:38,559 Speaker 1: year without a permanent CEO. In fact, it was thirteen 233 00:13:38,600 --> 00:13:41,320 Speaker 1: months before the company had a new official CEO with 234 00:13:41,400 --> 00:13:45,600 Speaker 1: Todd Bradley, but then Bradley quit in seventeen along with 235 00:13:45,720 --> 00:13:50,160 Speaker 1: chief financial officer Scott Ellison. The Forbes reported that Mozito's 236 00:13:50,160 --> 00:13:53,760 Speaker 1: website kept both of those men listed on their executive 237 00:13:53,840 --> 00:13:56,880 Speaker 1: leadership websit page, you know, for a few months afterward, 238 00:13:57,520 --> 00:14:00,840 Speaker 1: which seems more than a bit suss. So that probably 239 00:14:01,200 --> 00:14:03,880 Speaker 1: didn't look too good from the outside, and that might 240 00:14:03,960 --> 00:14:07,320 Speaker 1: explain why the leaders of Mozito decided to reincorporate and 241 00:14:07,400 --> 00:14:10,400 Speaker 1: change the name of the company to definitive. You don't 242 00:14:10,480 --> 00:14:13,440 Speaker 1: want to be another therapist after all. While the company 243 00:14:13,480 --> 00:14:15,400 Speaker 1: may not be a scam, that doesn't mean it's a 244 00:14:15,480 --> 00:14:18,680 Speaker 1: viable business either. There have been numerous articles written about 245 00:14:18,679 --> 00:14:22,000 Speaker 1: how the company, throughout its history had found itself scrabbling 246 00:14:22,040 --> 00:14:27,000 Speaker 1: to keep things going, mostly through additional rounds of investment. Now, personally, 247 00:14:27,320 --> 00:14:29,160 Speaker 1: I hope that the company is able to get its 248 00:14:29,160 --> 00:14:31,480 Speaker 1: feet on the ground because I think the service is 249 00:14:31,600 --> 00:14:34,440 Speaker 1: valuable for all those populations who don't have access to 250 00:14:34,480 --> 00:14:38,280 Speaker 1: bank accounts. It's just unfortunate that this appears to be 251 00:14:38,320 --> 00:14:41,480 Speaker 1: a very difficult service that can be done profitably. When 252 00:14:41,520 --> 00:14:44,120 Speaker 1: you think about it, it kind of makes sense. Most 253 00:14:44,160 --> 00:14:47,040 Speaker 1: of the transactions you would imagine would be pretty small, 254 00:14:47,640 --> 00:14:51,200 Speaker 1: and so any transaction fee you would take would be 255 00:14:51,440 --> 00:14:54,320 Speaker 1: pennies on the dollar, so you would need a lot 256 00:14:54,600 --> 00:14:57,120 Speaker 1: of them in order to make a profit. You would 257 00:14:57,120 --> 00:15:00,360 Speaker 1: have to really be operating at our huge scale, and 258 00:15:00,440 --> 00:15:04,560 Speaker 1: getting that huge scale is tough. As for Liberty, he 259 00:15:04,720 --> 00:15:07,680 Speaker 1: was awaiting trial for those charges I mentioned when on 260 00:15:07,840 --> 00:15:11,640 Speaker 1: January nineteen one, we learned that he was one of 261 00:15:11,640 --> 00:15:15,640 Speaker 1: those lucky individuals to receive a presidential pardon from outgoing 262 00:15:15,720 --> 00:15:20,840 Speaker 1: President Donald Trump. Interestingly, reporters have sometimes referred to Liberty 263 00:15:21,000 --> 00:15:24,880 Speaker 1: as Trump but with a main accent. That's main as 264 00:15:24,880 --> 00:15:28,560 Speaker 1: in the state in the northeastern United States. Now, it's 265 00:15:28,600 --> 00:15:32,480 Speaker 1: possible we could put Mozito infinitive in the same general 266 00:15:32,520 --> 00:15:35,640 Speaker 1: category as theories, in the sense that it may be 267 00:15:35,760 --> 00:15:39,920 Speaker 1: that the actual central idea for the business could be untenable. 268 00:15:40,240 --> 00:15:43,560 Speaker 1: Now I don't know if that's true. I'm no financial expert. 269 00:15:43,680 --> 00:15:46,320 Speaker 1: Perhaps if you could get the operations up to scale, 270 00:15:46,360 --> 00:15:51,520 Speaker 1: maybe it would all work fine. I don't know. I mean, granted, pennies, 271 00:15:51,720 --> 00:15:54,880 Speaker 1: if you've got enough of them, do amount to dollars. 272 00:15:55,000 --> 00:15:58,760 Speaker 1: So there is that. Well, we're gonna take a quick break, 273 00:15:59,040 --> 00:16:01,160 Speaker 1: and when we come back, we'll talk about some more 274 00:16:01,200 --> 00:16:05,200 Speaker 1: startups that have had big problems. But first let's take 275 00:16:05,240 --> 00:16:17,240 Speaker 1: that break. Similar in some ways to the Mozito story 276 00:16:17,280 --> 00:16:19,640 Speaker 1: we listened to just before the break is that of 277 00:16:19,760 --> 00:16:23,320 Speaker 1: bow tie, which is actually spelled b O u x 278 00:16:23,400 --> 00:16:26,720 Speaker 1: t i E. And just to be clear, this is 279 00:16:26,760 --> 00:16:31,160 Speaker 1: not the current bow tie by that spelling, which based 280 00:16:31,160 --> 00:16:33,960 Speaker 1: on what I'm looking at at my screen right now, 281 00:16:34,400 --> 00:16:37,200 Speaker 1: that's some sort of company that sells TikTok views and 282 00:16:37,320 --> 00:16:40,880 Speaker 1: video shares in order to artificially boost the performance of 283 00:16:40,880 --> 00:16:44,440 Speaker 1: TikTok videos, which is just plain lame. It's straight up 284 00:16:44,480 --> 00:16:47,600 Speaker 1: there with companies that used to sell Twitter Twitter followers, right, Like, 285 00:16:48,320 --> 00:16:50,480 Speaker 1: that's something that's fallen out of favor over at Twitter 286 00:16:50,800 --> 00:16:54,120 Speaker 1: because Twitter has done multiple cullings of bought accounts, so 287 00:16:54,960 --> 00:16:58,080 Speaker 1: those have largely been white clear of the platform. But 288 00:16:58,400 --> 00:17:01,320 Speaker 1: we're seeing that same sort of practice spread to platforms 289 00:17:01,360 --> 00:17:04,199 Speaker 1: like TikTok. If you're an influencer and you're trying to 290 00:17:04,400 --> 00:17:11,000 Speaker 1: sell your you know, big following to various sponsors, maybe 291 00:17:11,040 --> 00:17:15,199 Speaker 1: you're engaging in some of these uh, unethical activities in 292 00:17:15,320 --> 00:17:17,960 Speaker 1: order to convince those sponsors. Hey, a lot of people 293 00:17:18,000 --> 00:17:20,880 Speaker 1: watch my stuff. But no, no, no, I'm talking about 294 00:17:20,960 --> 00:17:23,800 Speaker 1: a different bow Tie It was a company founded by 295 00:17:23,840 --> 00:17:28,080 Speaker 1: an entrepreneur named Renato Libric. The idea was to create 296 00:17:28,080 --> 00:17:32,720 Speaker 1: a digital platform for gift cards and loyalty cards. Librics 297 00:17:32,800 --> 00:17:36,159 Speaker 1: bow Tie company offered users the ability to purchase digital 298 00:17:36,200 --> 00:17:39,120 Speaker 1: gift cards to all sorts of major merchants and then 299 00:17:39,160 --> 00:17:42,600 Speaker 1: customize them with graphics and messages before sending them off 300 00:17:42,600 --> 00:17:45,480 Speaker 1: to family and friends, So it was a neat way 301 00:17:45,800 --> 00:17:48,520 Speaker 1: to create a sort of personalized experience, which I think 302 00:17:48,560 --> 00:17:51,000 Speaker 1: helps take some of the stigma out of, you know, 303 00:17:51,040 --> 00:17:55,040 Speaker 1: the whole gift card thing. And being digital, it should 304 00:17:55,080 --> 00:17:59,080 Speaker 1: be relatively easy to redeem those gift cards with online accounts, 305 00:17:59,280 --> 00:18:02,120 Speaker 1: making it less likely that they would go unused. I mean, 306 00:18:02,200 --> 00:18:05,719 Speaker 1: just a year ago, c NBC reported that Americans possessed 307 00:18:05,760 --> 00:18:09,280 Speaker 1: more than twenty one billion with a b dollars worth 308 00:18:09,320 --> 00:18:12,560 Speaker 1: of unused gift cards in store credit. By the way, 309 00:18:12,640 --> 00:18:15,440 Speaker 1: that's kind of why merchants love gift cards. There's a 310 00:18:15,440 --> 00:18:17,760 Speaker 1: good chance they'll never have to redeem them, and the 311 00:18:17,800 --> 00:18:22,159 Speaker 1: profit margin is ridiculous. Now, with bow Tie, it doesn't 312 00:18:22,160 --> 00:18:25,200 Speaker 1: sound like Librick was trying to funnel cash to himself, 313 00:18:25,480 --> 00:18:28,879 Speaker 1: which sets him apart from folks like Michael Liberty. But 314 00:18:28,960 --> 00:18:32,840 Speaker 1: he did forge signatures and produce false documents to make 315 00:18:32,880 --> 00:18:35,880 Speaker 1: it seem as though bow Tie was worth far more 316 00:18:36,040 --> 00:18:38,720 Speaker 1: than its true value in an effort to convince more 317 00:18:38,720 --> 00:18:42,560 Speaker 1: investors to pour money into the venture. So in that respect, 318 00:18:42,920 --> 00:18:45,639 Speaker 1: I guess that bow Tie is kind of similar to 319 00:18:45,680 --> 00:18:48,320 Speaker 1: the bow tie of today. So the bow tie of 320 00:18:48,400 --> 00:18:52,199 Speaker 1: today is all about inflating TikTok numbers, and libric was 321 00:18:52,240 --> 00:18:55,719 Speaker 1: all about inflating the apparent value of bow tie. So 322 00:18:56,400 --> 00:18:59,560 Speaker 1: there's more going on there than I originally thought. Well, 323 00:18:59,560 --> 00:19:01,919 Speaker 1: perhaps a Brick was just desperately trying to get some 324 00:19:02,000 --> 00:19:06,120 Speaker 1: momentum going with the hope that once things were really moving, 325 00:19:06,280 --> 00:19:08,399 Speaker 1: he'd be able to stick to the straight and narrow. 326 00:19:09,040 --> 00:19:12,240 Speaker 1: But he was caught out. Towards the end of ten 327 00:19:12,400 --> 00:19:15,119 Speaker 1: Librick was found guilty of wire fraud and sentenced to 328 00:19:15,200 --> 00:19:17,880 Speaker 1: thirty six months in prison in order to pay out 329 00:19:17,880 --> 00:19:20,560 Speaker 1: more than one and a half million dollars in restitution. 330 00:19:21,200 --> 00:19:23,320 Speaker 1: Based on what I've read, I would say that this 331 00:19:23,400 --> 00:19:26,160 Speaker 1: is another case where someone had an idea that sounded 332 00:19:26,200 --> 00:19:29,360 Speaker 1: pretty good, proved to be harder to pull off profitably 333 00:19:29,520 --> 00:19:32,640 Speaker 1: than was first anticipated, found it difficult to get enough 334 00:19:32,680 --> 00:19:36,320 Speaker 1: investments to stay afloat, and then resorted to illegal means 335 00:19:36,359 --> 00:19:39,720 Speaker 1: to cover the bills. Now, one person whose name has 336 00:19:39,800 --> 00:19:43,240 Speaker 1: to come up when you're talking about grandiose startup ideas 337 00:19:43,480 --> 00:19:47,000 Speaker 1: is Elon Musk. One of the numerous ideas Musku has 338 00:19:47,119 --> 00:19:50,399 Speaker 1: championed is that of the hyper loop. So, in short, 339 00:19:50,440 --> 00:19:53,400 Speaker 1: a hyper loop system, at least on the original design, 340 00:19:53,800 --> 00:19:58,240 Speaker 1: would involve trains traveling inside tubes, and inside those tubes 341 00:19:58,240 --> 00:20:00,560 Speaker 1: you would pump out most of the air to be 342 00:20:00,680 --> 00:20:03,960 Speaker 1: very low air pressure, almost a vacuum, and that cuts 343 00:20:04,000 --> 00:20:07,800 Speaker 1: way down on wind resistance. In addition, the trains would 344 00:20:07,800 --> 00:20:11,520 Speaker 1: not travel with wheels on a track. Instead, they would 345 00:20:11,520 --> 00:20:15,160 Speaker 1: travel atop air bearings. Essentially, a cushion of air would 346 00:20:15,200 --> 00:20:18,840 Speaker 1: keep the trains afloat above the inner surface of the tunnel. 347 00:20:19,240 --> 00:20:23,480 Speaker 1: Electro Magnets would provide the propulsion to accelerate and decelerate 348 00:20:23,520 --> 00:20:26,960 Speaker 1: the trains, which, with such reduced friction, would be able 349 00:20:27,000 --> 00:20:30,320 Speaker 1: to travel at incredible speeds like essentially the speeds that 350 00:20:30,359 --> 00:20:34,240 Speaker 1: you would see aircraft travel. One startup that formed after 351 00:20:34,359 --> 00:20:40,119 Speaker 1: Musk's proposal was Hyperloop Technologies, founded by Shervin Pishavar and 352 00:20:40,320 --> 00:20:44,800 Speaker 1: former SpaceX engineer Brogan Bam Brogan. The story of that 353 00:20:44,880 --> 00:20:47,439 Speaker 1: company is way too long for this episode, and it 354 00:20:47,520 --> 00:20:53,320 Speaker 1: involves tons of scandals and also mergers and name changes 355 00:20:53,400 --> 00:20:57,000 Speaker 1: and some seriously ugly in fighting, and Pischavar would step 356 00:20:57,040 --> 00:20:59,879 Speaker 1: down in the wake of sexual harassment charges, which he 357 00:21:00,080 --> 00:21:03,640 Speaker 1: maintains was all a smear campaign. The company is still 358 00:21:03,680 --> 00:21:06,399 Speaker 1: around today. In fact, it's the one that conducted a 359 00:21:06,440 --> 00:21:09,840 Speaker 1: successful test with people aboard a hyperloop capsule back in 360 00:21:09,880 --> 00:21:13,080 Speaker 1: November of twenty but the company would change its name 361 00:21:13,080 --> 00:21:17,440 Speaker 1: from Hyperloop Technologies to Hyperloop One, to Virgin hyper Loop one, 362 00:21:17,840 --> 00:21:21,240 Speaker 1: and now it's just Virgin Hyperloop. Anyway, the company I 363 00:21:21,280 --> 00:21:24,159 Speaker 1: wanted to cover is the one that Brogan bam Brogan 364 00:21:24,200 --> 00:21:28,720 Speaker 1: would found after leaving Hyperloop one. So bam Brogan and 365 00:21:28,760 --> 00:21:31,320 Speaker 1: a couple of other executives all left hyper Loop one 366 00:21:31,359 --> 00:21:34,200 Speaker 1: at the same time and filed a lawsuit against their 367 00:21:34,200 --> 00:21:38,080 Speaker 1: former employer. They alleged that the company had violated numerous 368 00:21:38,119 --> 00:21:45,160 Speaker 1: agreements and abandoned its fiduciary responsibilities, and worse, they alleged 369 00:21:45,280 --> 00:21:49,200 Speaker 1: abuse and threats, and the company would file a countersuit 370 00:21:49,440 --> 00:21:53,159 Speaker 1: against those former executives, alleging that they had attempted to 371 00:21:53,240 --> 00:21:56,160 Speaker 1: rest control of the company away from the leadership team 372 00:21:56,400 --> 00:21:59,439 Speaker 1: and the board of directors, essentially that they were planning 373 00:21:59,440 --> 00:22:02,760 Speaker 1: a coup. Both parties would settle their lawsuits out of 374 00:22:02,800 --> 00:22:06,720 Speaker 1: court in sixteen, and bam Brogan then founded a competing 375 00:22:06,800 --> 00:22:10,720 Speaker 1: hyper loop company called Arrival. He and a couple of 376 00:22:10,760 --> 00:22:14,879 Speaker 1: other colleagues formed Arrival in two thousand seventeen. One co 377 00:22:15,040 --> 00:22:19,720 Speaker 1: founder Andrew Leeu had previously worked with a construction company 378 00:22:19,800 --> 00:22:23,199 Speaker 1: called a Calm a e c o M. Another co 379 00:22:23,359 --> 00:22:26,960 Speaker 1: founder was Jaden Smith, who, like Bam Brogan, had previously 380 00:22:27,000 --> 00:22:31,920 Speaker 1: worked with SpaceX. He had also previously worked with the CIA. Now, 381 00:22:31,960 --> 00:22:35,240 Speaker 1: the hyper loop design is an interesting and innovative one, 382 00:22:35,600 --> 00:22:38,879 Speaker 1: but it also will require a ton of money to 383 00:22:38,960 --> 00:22:42,000 Speaker 1: make it a reality. Musk was first talking about the 384 00:22:42,000 --> 00:22:45,640 Speaker 1: idea way back in and we're still in the experimental 385 00:22:45,640 --> 00:22:49,760 Speaker 1: and testing stages in one and that's just get to 386 00:22:49,800 --> 00:22:52,560 Speaker 1: a point where we're confident that the technology is a 387 00:22:52,640 --> 00:22:55,880 Speaker 1: viable one for the purposes of transporting people and cargo 388 00:22:56,080 --> 00:22:59,840 Speaker 1: quickly and safely. After that, you've got the daunting to 389 00:23:00,000 --> 00:23:02,960 Speaker 1: ask of actually securing the legal rights to build out 390 00:23:03,040 --> 00:23:07,879 Speaker 1: routes between different destinations. That includes everything from securing permission 391 00:23:07,920 --> 00:23:12,600 Speaker 1: from various local governments and environmental agencies, to the actual 392 00:23:12,640 --> 00:23:18,640 Speaker 1: construction and more. It's time consuming and really expensive. Perhaps 393 00:23:18,640 --> 00:23:21,760 Speaker 1: for that reason, Arrival dumped the idea of going the 394 00:23:21,840 --> 00:23:25,240 Speaker 1: hyperloop throughout entirely, so instead it would go with a 395 00:23:25,280 --> 00:23:30,280 Speaker 1: more established technology, that of magnetic levitation. Maglev trains have 396 00:23:30,320 --> 00:23:33,520 Speaker 1: been around for a while. The technology is well understood, 397 00:23:33,560 --> 00:23:37,440 Speaker 1: it's proven to work. We use it today. And essentially 398 00:23:37,600 --> 00:23:41,280 Speaker 1: you've got magnets of similar polarity in the tracks and 399 00:23:41,440 --> 00:23:45,240 Speaker 1: under the trains, and since similar polarities repel one another, 400 00:23:45,640 --> 00:23:48,160 Speaker 1: like when you try to push the north pole of 401 00:23:48,200 --> 00:23:52,560 Speaker 1: two different permanent magnets together, the train will hover over 402 00:23:52,680 --> 00:23:54,919 Speaker 1: the track. You no longer have to deal with the 403 00:23:54,960 --> 00:23:59,400 Speaker 1: friction of wheels against rails or anything like that. The magnets, 404 00:23:59,400 --> 00:24:02,280 Speaker 1: by the way, can be permanent, they can be electro magnets, 405 00:24:02,359 --> 00:24:04,600 Speaker 1: or they can be a combination of the two. On 406 00:24:04,720 --> 00:24:08,160 Speaker 1: top of that, Arrival wasn't planning on and closing its 407 00:24:08,200 --> 00:24:11,360 Speaker 1: tracks and tunnels, so there would be no low pressure 408 00:24:11,400 --> 00:24:15,560 Speaker 1: track system with Arrivo, which again would significantly cut down 409 00:24:15,600 --> 00:24:18,960 Speaker 1: on construction and operation costs, though it would also mean 410 00:24:19,000 --> 00:24:21,600 Speaker 1: that the trains would have encounter some air resistance when 411 00:24:21,600 --> 00:24:24,440 Speaker 1: traveling down the tracks, so these would not be able 412 00:24:24,480 --> 00:24:27,360 Speaker 1: to go at the wicked fast speeds of the proposed 413 00:24:27,440 --> 00:24:31,080 Speaker 1: hyper loop trains. The company had planned to build a 414 00:24:31,119 --> 00:24:34,679 Speaker 1: test track out in Colorado, but Arrival was having a 415 00:24:34,720 --> 00:24:37,920 Speaker 1: lot of trouble getting investors on board, perhaps the fact 416 00:24:37,960 --> 00:24:40,720 Speaker 1: that they were no longer pursuing the more ambitious and 417 00:24:41,160 --> 00:24:45,240 Speaker 1: inarguably more risky hyper loop design. Or maybe it was 418 00:24:45,280 --> 00:24:48,240 Speaker 1: because of the very messy and very public breakup between 419 00:24:48,280 --> 00:24:51,920 Speaker 1: the Arrival founders and hyper Loop One, maybe that had 420 00:24:52,000 --> 00:24:55,160 Speaker 1: left kind of a stain on things within the company. 421 00:24:55,240 --> 00:24:58,719 Speaker 1: Things seem to be kind of off as well. An 422 00:24:58,760 --> 00:25:02,399 Speaker 1: anonymous employee posted a review on glass door. That's the 423 00:25:02,400 --> 00:25:07,480 Speaker 1: website that allows employees to review their workplaces. The review 424 00:25:07,520 --> 00:25:10,720 Speaker 1: claimed that the Arrival offices were operating with little or 425 00:25:10,800 --> 00:25:14,679 Speaker 1: no direction from leadership, and the report also indicated that 426 00:25:14,800 --> 00:25:18,720 Speaker 1: a leader later implied to be Vam Brogan himself brought 427 00:25:18,840 --> 00:25:21,320 Speaker 1: an axe to the office and then used it to 428 00:25:21,440 --> 00:25:25,400 Speaker 1: hack chunks out of the walls and frustration, which, yeah, 429 00:25:25,440 --> 00:25:27,959 Speaker 1: I mean if my boss showed up to my office 430 00:25:28,000 --> 00:25:30,000 Speaker 1: with a tool that could be used as a lethal 431 00:25:30,040 --> 00:25:32,719 Speaker 1: weapon and then he went around hitting the walls with it, 432 00:25:33,080 --> 00:25:37,680 Speaker 1: I too would describe my office environment as quote unquote unstable. 433 00:25:38,320 --> 00:25:43,080 Speaker 1: Arrival failed to secure Series A investment funding, Jaden Smith 434 00:25:43,119 --> 00:25:48,119 Speaker 1: and Andrew Leeu quietly parted ways with Arrival in Not 435 00:25:48,240 --> 00:25:51,640 Speaker 1: long after that, the company furloughed employees and then laid 436 00:25:51,680 --> 00:25:54,879 Speaker 1: off about half of them. Then it shut down the 437 00:25:54,920 --> 00:25:57,760 Speaker 1: startup just failed to get any momentum, which, as I 438 00:25:57,840 --> 00:25:59,760 Speaker 1: understand it, is a bad thing if you're trying to 439 00:25:59,800 --> 00:26:03,160 Speaker 1: move people from one place to another. It's very possible 440 00:26:03,359 --> 00:26:07,040 Speaker 1: that the fallout from Hyperloop one doomed arrival from the start, 441 00:26:07,440 --> 00:26:11,320 Speaker 1: though the descriptions I've seen of Bambrogan's behavior may also 442 00:26:11,440 --> 00:26:14,440 Speaker 1: have played a part in any case, this is an 443 00:26:14,440 --> 00:26:17,119 Speaker 1: example of a startup that didn't really get a chance 444 00:26:17,200 --> 00:26:20,080 Speaker 1: to start up at all. And like I said, I'll 445 00:26:20,119 --> 00:26:21,639 Speaker 1: have to do a full treatment on the story of 446 00:26:21,720 --> 00:26:25,399 Speaker 1: Virgin Hyperloop at some point, because y'all that could be 447 00:26:25,400 --> 00:26:29,840 Speaker 1: a soap opera. Another startup that had a more spectacular 448 00:26:29,880 --> 00:26:34,560 Speaker 1: collapse was one for dot one. That is the numeral 449 00:26:34,760 --> 00:26:41,600 Speaker 1: one fo R dot oh n E not great? Right? 450 00:26:42,480 --> 00:26:46,520 Speaker 1: Actually I should say I really mean job Sonic. Wait no, no, no, 451 00:26:46,560 --> 00:26:50,040 Speaker 1: I'm sorry, I should mean work Riot, except it's work right, 452 00:26:50,080 --> 00:26:54,240 Speaker 1: it's w R k R I O T. Yeah. This 453 00:26:54,280 --> 00:26:57,520 Speaker 1: was a company that changed names three times very quickly 454 00:26:57,560 --> 00:27:00,520 Speaker 1: in a matter of weeks. Actually, a man named Isaac 455 00:27:00,600 --> 00:27:04,159 Speaker 1: Choi founded the company, which was a job recruiting platform, 456 00:27:04,720 --> 00:27:07,199 Speaker 1: essentially a place where companies and job seekers could find 457 00:27:07,240 --> 00:27:09,560 Speaker 1: a good match. You could post jobs you could seek 458 00:27:09,640 --> 00:27:12,280 Speaker 1: jobs that kind of thing, at least that's what it 459 00:27:12,320 --> 00:27:15,800 Speaker 1: was supposed to be. Isaac Choi positioned himself as a 460 00:27:15,880 --> 00:27:19,320 Speaker 1: graduate of the Stern School of Business at New York University, 461 00:27:19,480 --> 00:27:21,959 Speaker 1: and that prior to founding work Riot, he was an 462 00:27:22,000 --> 00:27:25,880 Speaker 1: analyst at JP Morgan for four years. Both of those 463 00:27:25,920 --> 00:27:30,240 Speaker 1: claims would be disputed by the respective organizations later on, 464 00:27:30,440 --> 00:27:33,679 Speaker 1: indicating that Mr Choi was fabricating his resume in an 465 00:27:33,720 --> 00:27:38,640 Speaker 1: attempt to manufacture credibility. Choi claimed to have raised investment 466 00:27:38,680 --> 00:27:42,240 Speaker 1: funds for work Riot through private investors, rather than seeking 467 00:27:42,240 --> 00:27:45,320 Speaker 1: out a formal series of funding or a venture capital 468 00:27:45,359 --> 00:27:49,800 Speaker 1: firm for support. The company began hiring on employees, many 469 00:27:49,840 --> 00:27:53,840 Speaker 1: of them Chinese citizens in America on work visas, which 470 00:27:53,880 --> 00:27:59,200 Speaker 1: will later make this story particularly upsetting. One employee, Penny Kim, 471 00:27:59,680 --> 00:28:02,520 Speaker 1: was hired on to be the head of marketing. Kim 472 00:28:02,520 --> 00:28:06,040 Speaker 1: would later write a piece about her experiences on medium, 473 00:28:06,240 --> 00:28:08,320 Speaker 1: though at the time she changed the names of the 474 00:28:08,440 --> 00:28:12,360 Speaker 1: people and the company in an effort to quote protect 475 00:28:12,400 --> 00:28:16,359 Speaker 1: the innocent and the guilty end quote. Later she would 476 00:28:16,400 --> 00:28:18,719 Speaker 1: confirm that the company she was writing about was in 477 00:28:18,760 --> 00:28:23,800 Speaker 1: fact work Riot. So what the heck happened. In this case, 478 00:28:24,119 --> 00:28:29,280 Speaker 1: the business leader was defrauding his employees. Kim was told 479 00:28:29,280 --> 00:28:31,840 Speaker 1: that she would have a budget of four million dollars 480 00:28:31,880 --> 00:28:34,840 Speaker 1: to make a marketing plan, so she began to put 481 00:28:34,880 --> 00:28:37,640 Speaker 1: one together, which included the push for the new name 482 00:28:37,720 --> 00:28:40,760 Speaker 1: for the company, because the previous one was quote not 483 00:28:41,240 --> 00:28:44,080 Speaker 1: s e O friendly end quote. So this was when 484 00:28:44,160 --> 00:28:47,960 Speaker 1: it was still one four dot one and the name 485 00:28:47,960 --> 00:28:50,920 Speaker 1: would change to job Sonic, which Kim said was not 486 00:28:51,040 --> 00:28:54,360 Speaker 1: her choice, but one of the other business leaders pushed it. 487 00:28:55,120 --> 00:28:58,520 Speaker 1: She wrote that she would find out later that her 488 00:28:58,720 --> 00:29:03,280 Speaker 1: four million dollar and was meaningless because it was dependent 489 00:29:03,360 --> 00:29:05,960 Speaker 1: upon that budget of four million dollars, and it turned 490 00:29:05,960 --> 00:29:09,400 Speaker 1: out there was no four million dollar budget to be 491 00:29:09,480 --> 00:29:13,040 Speaker 1: found for the whole company, let alone for the marketing department. 492 00:29:13,680 --> 00:29:17,560 Speaker 1: Kim wrote that the CEO that being Choi was hiring 493 00:29:17,600 --> 00:29:21,200 Speaker 1: on people who had questionable applicable experience for the job 494 00:29:21,240 --> 00:29:25,120 Speaker 1: at hand, especially in the leadership team, and she said 495 00:29:25,120 --> 00:29:28,480 Speaker 1: that even the job at hand itself was poorly defined. 496 00:29:28,880 --> 00:29:32,520 Speaker 1: She also wrote about going along on investor meetings, something 497 00:29:32,640 --> 00:29:36,880 Speaker 1: she was curious about because she wanted to know what 498 00:29:37,120 --> 00:29:40,120 Speaker 1: was going on with having to get investors that the 499 00:29:40,240 --> 00:29:43,719 Speaker 1: claim was that the company was already funded, so why 500 00:29:43,800 --> 00:29:46,160 Speaker 1: would you need to go talk to investors so early. 501 00:29:46,680 --> 00:29:51,120 Speaker 1: At those meetings, Kim witnessed Choi talking more about himself 502 00:29:51,600 --> 00:29:54,960 Speaker 1: than the company. He was really selling his own qualifications 503 00:29:54,960 --> 00:29:57,520 Speaker 1: in an effort to try and get people to buy 504 00:29:57,560 --> 00:30:00,560 Speaker 1: into him rather than to buy into an idea for 505 00:30:00,600 --> 00:30:04,920 Speaker 1: a business. He also consistently failed to provide answers to 506 00:30:05,160 --> 00:30:08,239 Speaker 1: important questions, you know, questions like how much are you 507 00:30:08,280 --> 00:30:11,360 Speaker 1: bringing in versus how much are you spending. Turns out 508 00:30:11,520 --> 00:30:15,640 Speaker 1: investors are very curious about the answers to questions like that. 509 00:30:16,400 --> 00:30:19,479 Speaker 1: Kim also mentioned that her first paycheck was not a 510 00:30:19,520 --> 00:30:24,320 Speaker 1: normal one. It was a cashier's check with no pay stop. Now, apparently, 511 00:30:24,400 --> 00:30:28,360 Speaker 1: leading up to her being signed on as the marketing director, 512 00:30:28,880 --> 00:30:32,360 Speaker 1: a DP was handling payroll, and that was an important 513 00:30:32,400 --> 00:30:35,320 Speaker 1: step because one of the things a DP would do 514 00:30:35,800 --> 00:30:39,920 Speaker 1: would be to file paperwork that showed those in the 515 00:30:40,000 --> 00:30:43,360 Speaker 1: country who were on work visas were actually employed, so 516 00:30:43,440 --> 00:30:46,360 Speaker 1: the government could say, all right, you're on a work visa. 517 00:30:46,920 --> 00:30:50,160 Speaker 1: We received the notification from a DP that you were 518 00:30:50,200 --> 00:30:54,560 Speaker 1: paid for that period. Everything's cool. Well, without a DP there, 519 00:30:54,960 --> 00:30:58,320 Speaker 1: that was not happening and that meant that the visas 520 00:30:58,400 --> 00:31:01,320 Speaker 1: might not be considered valid, and that would mean that 521 00:31:01,360 --> 00:31:03,840 Speaker 1: people would be in danger of having those visas revoked 522 00:31:04,160 --> 00:31:07,400 Speaker 1: and they would be sent back home. Worse, Kim noted 523 00:31:07,440 --> 00:31:11,680 Speaker 1: that while she received a paycheck, most people didn't, and 524 00:31:11,760 --> 00:31:14,600 Speaker 1: this indicated that there had to be a big cash 525 00:31:14,600 --> 00:31:18,440 Speaker 1: flow problem at the company. Kim also related how an 526 00:31:18,440 --> 00:31:22,560 Speaker 1: employee in business development revealed that he had lent fifty 527 00:31:22,840 --> 00:31:27,440 Speaker 1: thousand dollars of his own money in savings, his life savings, 528 00:31:27,880 --> 00:31:32,120 Speaker 1: to the CEO of the company, something that was absolutely 529 00:31:32,240 --> 00:31:35,520 Speaker 1: a red flag. Heck, that's that's not even a red flag. 530 00:31:35,600 --> 00:31:41,080 Speaker 1: That's like an active, actual emergency. Later, still, after more 531 00:31:41,160 --> 00:31:45,320 Speaker 1: missed payments, Choice and out a message claiming that payroll 532 00:31:45,360 --> 00:31:48,120 Speaker 1: would be met because he included a screenshot of a 533 00:31:48,160 --> 00:31:53,440 Speaker 1: supposed Wells Fargo money transfer into the corporate accounts. Only 534 00:31:53,880 --> 00:31:57,160 Speaker 1: it wasn't legit. It was an altered image. In fact, 535 00:31:57,280 --> 00:31:59,200 Speaker 1: it was an altered image of one that you can 536 00:31:59,280 --> 00:32:01,800 Speaker 1: find just by doing a Google image search for a 537 00:32:01,800 --> 00:32:06,360 Speaker 1: Wells far ago transfer. Because Kim did that, she did 538 00:32:06,400 --> 00:32:10,200 Speaker 1: that Google image search and found the exact one that 539 00:32:10,360 --> 00:32:13,120 Speaker 1: Choi had taken and done a little tiny bit of 540 00:32:13,160 --> 00:32:16,560 Speaker 1: photo shopping to change. But he wasn't even that careful. 541 00:32:16,640 --> 00:32:20,360 Speaker 1: There were entire sections of that image that indicated that 542 00:32:20,440 --> 00:32:24,040 Speaker 1: it was much, you know, much older than what Troy 543 00:32:24,160 --> 00:32:27,440 Speaker 1: was saying. When there's a copyright notice that ends in 544 00:32:27,480 --> 00:32:31,440 Speaker 1: around two thousand fourteen and it's many years after two fourteen, 545 00:32:31,840 --> 00:32:35,400 Speaker 1: not a good sign. Kim would go on to file 546 00:32:35,720 --> 00:32:40,480 Speaker 1: a wage dispute claim and then Troy fired her. So 547 00:32:40,880 --> 00:32:45,280 Speaker 1: that wasn't the smartest thing because obviously, as an employee, 548 00:32:45,320 --> 00:32:48,800 Speaker 1: you could then pursue legal action against your employer. So 549 00:32:48,840 --> 00:32:52,080 Speaker 1: she wrote the piece and medium, and that prompted an 550 00:32:52,120 --> 00:32:56,040 Speaker 1: investigation by the FBI, and by then job Sonic had 551 00:32:56,080 --> 00:32:59,000 Speaker 1: become work Riot, but the Shenanigans were still the same. 552 00:32:59,560 --> 00:33:03,320 Speaker 1: Choi would be indicted in two thousand seventeen for defrauding employees. 553 00:33:03,680 --> 00:33:06,760 Speaker 1: He pled guilty in eighteen to the charges and he 554 00:33:06,840 --> 00:33:10,840 Speaker 1: was sentenced to time served, meaning he didn't go to prison, 555 00:33:11,320 --> 00:33:14,520 Speaker 1: and a fine of less than one thousand dollars. The 556 00:33:14,600 --> 00:33:17,440 Speaker 1: company was no more, and I do feel awful for 557 00:33:17,480 --> 00:33:20,000 Speaker 1: all those employees who were working in good faith for 558 00:33:20,040 --> 00:33:24,560 Speaker 1: a company that was no more than a facade, particularly 559 00:33:24,840 --> 00:33:27,560 Speaker 1: those employees who were in the country on work visas. 560 00:33:28,080 --> 00:33:31,560 Speaker 1: They were all true victims of this scam. It's one 561 00:33:31,600 --> 00:33:33,760 Speaker 1: of those cases where you know, you point to the 562 00:33:33,800 --> 00:33:35,960 Speaker 1: target of the scam and it tends to be the 563 00:33:36,040 --> 00:33:39,480 Speaker 1: employees more than the potential customers or even the investors. 564 00:33:40,400 --> 00:33:43,960 Speaker 1: That's that's not cool. All right, Well, we're gonna take 565 00:33:44,040 --> 00:33:46,480 Speaker 1: another quick break, and when we come back, I'll talk 566 00:33:46,520 --> 00:33:49,640 Speaker 1: about the money behind the money and how that can 567 00:33:49,680 --> 00:33:53,120 Speaker 1: be hinky as well. But first let's take this quick break. 568 00:34:01,600 --> 00:34:04,480 Speaker 1: I'll wrap up with a couple of companies that weren't 569 00:34:04,520 --> 00:34:09,200 Speaker 1: so much startups as they were a venture capital investment company. Now, 570 00:34:09,239 --> 00:34:12,960 Speaker 1: these were supposed to be all about funding startups, and 571 00:34:13,040 --> 00:34:15,200 Speaker 1: the first one I want to talk about was called 572 00:34:15,239 --> 00:34:18,919 Speaker 1: the Rothenburg Ventures, and it's a story that would likely 573 00:34:19,000 --> 00:34:22,520 Speaker 1: make a movie akin to something like Wolf of Wall Street. 574 00:34:23,200 --> 00:34:25,320 Speaker 1: So at the heart of this story is the founder 575 00:34:25,320 --> 00:34:29,120 Speaker 1: of the company, Mike Rothenberg. He's a young guy. He's 576 00:34:29,120 --> 00:34:32,880 Speaker 1: in his mid thirties and back in twelve he founded 577 00:34:32,920 --> 00:34:36,440 Speaker 1: the VC company by raising up cash from his friends, 578 00:34:36,480 --> 00:34:40,120 Speaker 1: his family, and some colleagues. He had business degrees from 579 00:34:40,200 --> 00:34:43,920 Speaker 1: Stanford and Harvard under his belt. Legit ones. He was 580 00:34:44,040 --> 00:34:47,640 Speaker 1: charismatic he was an effective salesman, and he was able 581 00:34:47,680 --> 00:34:50,879 Speaker 1: to get this venture capital company off the ground. This 582 00:34:50,960 --> 00:34:55,080 Speaker 1: was particularly impressive because Rothenberg himself didn't come from money, 583 00:34:55,320 --> 00:34:58,720 Speaker 1: so this isn't the story of a rich person calling 584 00:34:58,800 --> 00:35:01,879 Speaker 1: up all his rich friends so that they can all 585 00:35:01,920 --> 00:35:06,360 Speaker 1: become more rich. Rothenberg raised around five million dollars for 586 00:35:06,440 --> 00:35:09,560 Speaker 1: his VC firm, which was meant to provide seed money 587 00:35:09,600 --> 00:35:14,000 Speaker 1: for new startups. Just two years after launching the venture 588 00:35:14,040 --> 00:35:18,600 Speaker 1: capital company, it spun off a starter accelerator called River, 589 00:35:19,000 --> 00:35:23,280 Speaker 1: which focused on companies related to virtual reality. Rothenberg Ventures 590 00:35:23,360 --> 00:35:26,279 Speaker 1: and River both invested early in a lot of startups, 591 00:35:26,560 --> 00:35:30,320 Speaker 1: including a few that would see some pretty big subsequent 592 00:35:30,480 --> 00:35:34,960 Speaker 1: investment rounds. So things were going pretty well. But Rothenberg 593 00:35:35,040 --> 00:35:38,920 Speaker 1: was also getting into the habit of spending lavishly, sometimes 594 00:35:38,920 --> 00:35:42,360 Speaker 1: in an effort to attract more investors and limited partners. 595 00:35:42,880 --> 00:35:47,239 Speaker 1: He famously hired professional race car driver Collect Davis to 596 00:35:47,520 --> 00:35:51,840 Speaker 1: appear at various events complete with a race car, which 597 00:35:52,120 --> 00:35:54,480 Speaker 1: cost a lot of money both for her and for 598 00:35:54,600 --> 00:35:57,920 Speaker 1: shipping the car around. He secured a suite at the 599 00:35:58,040 --> 00:36:01,719 Speaker 1: Super Bowl to wine and dine pactive partners. He spent 600 00:36:01,760 --> 00:36:04,960 Speaker 1: a lot in himself too. He hired personal drivers, he 601 00:36:05,080 --> 00:36:09,880 Speaker 1: hired a lot of personal assistance, he flew on a 602 00:36:09,920 --> 00:36:14,680 Speaker 1: private airline of subscription airline company, and generally, he spent 603 00:36:15,000 --> 00:36:19,120 Speaker 1: way more than what seemed appropriate or heck, even possible 604 00:36:19,200 --> 00:36:23,120 Speaker 1: for a VC company of such modest size as Rothenberg Ventures. 605 00:36:23,640 --> 00:36:26,400 Speaker 1: In other words, people started to say, how is this 606 00:36:26,480 --> 00:36:30,520 Speaker 1: company making enough money for him to be spending this much? 607 00:36:31,160 --> 00:36:34,399 Speaker 1: So in twenty sixteen, the cracks began to show. A 608 00:36:34,400 --> 00:36:38,120 Speaker 1: ton of the leadership team at Rothenberg Ventures jumped ship 609 00:36:38,200 --> 00:36:41,600 Speaker 1: in a matter of months. They included the director of finance, 610 00:36:41,960 --> 00:36:45,880 Speaker 1: the manager of the San Francisco office, the chief revenue officer, 611 00:36:46,040 --> 00:36:50,160 Speaker 1: the chief financial officer, the general manager, and more. And 612 00:36:50,200 --> 00:36:54,400 Speaker 1: the precipitating event that very likely led to that mass 613 00:36:54,520 --> 00:36:58,160 Speaker 1: exodus of leadership was that an employee had blown the 614 00:36:58,160 --> 00:37:01,240 Speaker 1: whistle on what appeared to be for odd The company 615 00:37:01,280 --> 00:37:06,560 Speaker 1: subsequently fired that employee, who then sued the company. The 616 00:37:06,800 --> 00:37:11,320 Speaker 1: SEC and the U. S. Department of Justice conducted investigations 617 00:37:11,480 --> 00:37:15,399 Speaker 1: and found that Mike Rothenberg had been siphoning money from 618 00:37:15,480 --> 00:37:19,520 Speaker 1: investors and putting it directly into his own pockets. The 619 00:37:19,680 --> 00:37:23,120 Speaker 1: SEC brought a civil lawsuit against Rothenburg, but the d 620 00:37:23,280 --> 00:37:28,080 Speaker 1: o J brought to criminal wire fraud charges, two charges 621 00:37:28,120 --> 00:37:32,040 Speaker 1: alleging he had made false bank statements, and money laundering 622 00:37:32,120 --> 00:37:35,960 Speaker 1: charges against him. Rothenberg lost the sec case and was 623 00:37:36,080 --> 00:37:39,680 Speaker 1: ordered to pay thirty one million dollars, and then he 624 00:37:39,880 --> 00:37:43,759 Speaker 1: also agreed to a ban from working in the securities industry, 625 00:37:43,800 --> 00:37:47,680 Speaker 1: with the possibility of appealing that ban after five years. 626 00:37:48,360 --> 00:37:51,600 Speaker 1: The d o j's wire fraud and false statement charges 627 00:37:51,920 --> 00:37:54,719 Speaker 1: brought with them a maximum sentence of thirty years in 628 00:37:54,760 --> 00:37:57,760 Speaker 1: prison each and remember there were four of those charges 629 00:37:58,600 --> 00:38:02,319 Speaker 1: plus a million dollar five. The money laundering charges could 630 00:38:02,320 --> 00:38:05,000 Speaker 1: result in another sentence of up to ten years and 631 00:38:05,040 --> 00:38:08,600 Speaker 1: to find twice the amount of money laundered if he 632 00:38:08,640 --> 00:38:12,120 Speaker 1: were convicted. Now, the latest I've seen about Rothenburg dates 633 00:38:12,160 --> 00:38:14,719 Speaker 1: to the summer of twenty twenty. The trial had not 634 00:38:14,800 --> 00:38:16,959 Speaker 1: yet taken place. Then I suspect the trial has still 635 00:38:17,000 --> 00:38:20,640 Speaker 1: not taken place. I didn't dig deep enough down into 636 00:38:20,680 --> 00:38:23,520 Speaker 1: the court system to find out when the prospective trial 637 00:38:23,680 --> 00:38:27,719 Speaker 1: is going to take place. And our final entry is 638 00:38:27,760 --> 00:38:31,319 Speaker 1: a fake venture capital firm that has been used to 639 00:38:31,360 --> 00:38:35,520 Speaker 1: steal money from investors twice. So let's talk about the 640 00:38:35,680 --> 00:38:39,239 Speaker 1: first time around and m I T graduate named Albert K. 641 00:38:39,560 --> 00:38:44,360 Speaker 1: Hugh founded a group of four management companies which the SEC. 642 00:38:45,080 --> 00:38:47,520 Speaker 1: So you know, the story is not gonna go well 643 00:38:47,560 --> 00:38:51,319 Speaker 1: if the SEC is involved. The SEC collectively refers to 644 00:38:51,360 --> 00:38:54,879 Speaker 1: as the Assinqua Managers. The general name I see used 645 00:38:54,880 --> 00:38:56,960 Speaker 1: most of the time to refer to whose scam is 646 00:38:57,000 --> 00:39:01,040 Speaker 1: as Sinqua Ventures, who position in the company as a 647 00:39:01,040 --> 00:39:05,120 Speaker 1: group of hedge funds that would invest in various startups 648 00:39:05,160 --> 00:39:10,320 Speaker 1: and give out huge dividends as a result, who convinced 649 00:39:10,360 --> 00:39:13,560 Speaker 1: a small group of investors to put about five million 650 00:39:13,600 --> 00:39:17,320 Speaker 1: dollars into the company, and two thousand five who said 651 00:39:17,360 --> 00:39:21,480 Speaker 1: that due to some weird tax and privacy reasons, he 652 00:39:21,560 --> 00:39:25,400 Speaker 1: needed to relocate his company to Singapore, which is not 653 00:39:25,560 --> 00:39:29,160 Speaker 1: a great sign. An investigation into who revealed that the 654 00:39:29,239 --> 00:39:32,600 Speaker 1: money wasn't going into hedge funds like he had claimed, 655 00:39:32,960 --> 00:39:37,640 Speaker 1: but that who had been misappropriating fund assets rather than 656 00:39:37,760 --> 00:39:41,000 Speaker 1: investing the money as promised. That's a direct quote from 657 00:39:41,000 --> 00:39:45,200 Speaker 1: an SEC filing. Now, essentially, he was claiming that investors 658 00:39:45,239 --> 00:39:47,880 Speaker 1: were going to see these high returns and instead he 659 00:39:47,920 --> 00:39:50,600 Speaker 1: was pocketing the money. And it kind of sounds like 660 00:39:50,680 --> 00:39:54,000 Speaker 1: he was about to pursue a ponzi scheme, only he 661 00:39:54,040 --> 00:39:57,400 Speaker 1: didn't follow up with subsequent rounds of investments. He just 662 00:39:57,560 --> 00:40:01,440 Speaker 1: kept all the money. Investors of eventually started asking for 663 00:40:01,480 --> 00:40:06,239 Speaker 1: their money back, and Who made himself increasingly scarce, refusing 664 00:40:06,239 --> 00:40:09,919 Speaker 1: to answer demands. He was essentially in hiding in Hong 665 00:40:10,000 --> 00:40:13,560 Speaker 1: Kong when he was arrested and then extradited to stand 666 00:40:13,560 --> 00:40:17,240 Speaker 1: trial in the United States. Who was indicted and tried 667 00:40:17,280 --> 00:40:20,040 Speaker 1: on seven charges of wire fraud, and he was found 668 00:40:20,120 --> 00:40:24,239 Speaker 1: guilty on all seven charges. Who received a sentence of 669 00:40:24,280 --> 00:40:28,520 Speaker 1: twelve years in prison on June twentieve. He would serve 670 00:40:28,719 --> 00:40:32,000 Speaker 1: several years in a minimum security prison. He was, however, 671 00:40:32,160 --> 00:40:37,560 Speaker 1: released in ten However, in the meantime between when he 672 00:40:38,000 --> 00:40:40,160 Speaker 1: was sent to prison in twenty twelve and when he 673 00:40:40,200 --> 00:40:45,160 Speaker 1: got out in twenty nineteen, something really strange happened in 674 00:40:45,280 --> 00:40:51,360 Speaker 1: twenty sixteen asinqua ventures returned. Who was not mentioned at all, 675 00:40:51,520 --> 00:40:55,480 Speaker 1: which really isn't surprising and he certainly couldn't have been 676 00:40:55,560 --> 00:40:58,680 Speaker 1: directly involved. He was in prison and he didn't have 677 00:40:58,719 --> 00:41:01,799 Speaker 1: any access to the Internet. He could send emails to 678 00:41:02,120 --> 00:41:05,880 Speaker 1: a previously approved list of recipients and they had to 679 00:41:05,960 --> 00:41:09,320 Speaker 1: agree to accept email from someone who was in prison, 680 00:41:09,640 --> 00:41:11,560 Speaker 1: but that was the extent of it. He couldn't do 681 00:41:11,600 --> 00:41:15,120 Speaker 1: any other Internet activities. However, The company claimed to be 682 00:41:15,200 --> 00:41:18,440 Speaker 1: a venture capital firm all the same with a Northern 683 00:41:18,480 --> 00:41:23,480 Speaker 1: California office address. The new Assinqua Ventures included two businesses, 684 00:41:23,600 --> 00:41:27,600 Speaker 1: one that would supposedly invest money into quote middle market 685 00:41:27,640 --> 00:41:31,960 Speaker 1: opportunities end Quote, and another financial advisor service that could 686 00:41:32,000 --> 00:41:35,600 Speaker 1: help facilitate really big corporate moves, like stuff like mergers 687 00:41:35,640 --> 00:41:39,239 Speaker 1: and acquisitions. The old as Sinqua Ventures u r l. 688 00:41:39,400 --> 00:41:43,080 Speaker 1: Came back into use, though with a very different website 689 00:41:43,120 --> 00:41:46,920 Speaker 1: from the original incarnation of a sinqua The new Assinqua 690 00:41:47,040 --> 00:41:50,640 Speaker 1: Ventures published a few press releases and sent them down 691 00:41:50,719 --> 00:41:53,880 Speaker 1: the pipeline so that they went to pr Newswire, which 692 00:41:54,120 --> 00:41:57,480 Speaker 1: carried the releases, which then got picked up by various 693 00:41:57,520 --> 00:42:01,560 Speaker 1: media outlets. By the way, this is also something that 694 00:42:01,600 --> 00:42:04,360 Speaker 1: we should all be aware of that press releases don't 695 00:42:04,400 --> 00:42:08,720 Speaker 1: necessarily reflect the truth. That's why reporting just on press 696 00:42:08,760 --> 00:42:12,839 Speaker 1: releases is a terrible idea without doing any further investigation, 697 00:42:13,360 --> 00:42:18,239 Speaker 1: because there are instances of people releasing false documents as 698 00:42:18,280 --> 00:42:21,359 Speaker 1: a press release and having that get picked up by 699 00:42:21,360 --> 00:42:25,680 Speaker 1: the press wire and thus distributed by various media outlets, 700 00:42:26,000 --> 00:42:27,759 Speaker 1: So if you do a search for the name A 701 00:42:27,920 --> 00:42:32,600 Speaker 1: sinqua Ventures, you might see a few press releases from 702 00:42:32,640 --> 00:42:35,319 Speaker 1: and Some of the press releases mentioned members of the 703 00:42:35,400 --> 00:42:39,440 Speaker 1: senior management team, like Steven Adler, who apparently wasn't the 704 00:42:39,480 --> 00:42:43,040 Speaker 1: Steven Adler who was drummer for Guns and Roses, though 705 00:42:43,080 --> 00:42:45,480 Speaker 1: that joke is kind of a stretch anyway. The Adler 706 00:42:45,560 --> 00:42:49,080 Speaker 1: listed in the releases spells Stephen with a pH, whereas 707 00:42:49,120 --> 00:42:52,279 Speaker 1: the drummer at Guns and Roses spells it with a V. 708 00:42:52,520 --> 00:42:54,839 Speaker 1: But I still had to stick a joke in there. 709 00:42:55,120 --> 00:42:58,520 Speaker 1: Adler also had a LinkedIn page which sent out connection 710 00:42:58,560 --> 00:43:02,520 Speaker 1: requests to a pretty wide net of different business leaders. 711 00:43:03,160 --> 00:43:06,640 Speaker 1: One of those requests went to an executive recruiter named 712 00:43:06,719 --> 00:43:11,239 Speaker 1: Marty McMahon who thought something was hinky about that profile, 713 00:43:11,680 --> 00:43:15,759 Speaker 1: so he performed a reverse image search on the profile photo, 714 00:43:15,840 --> 00:43:18,799 Speaker 1: which brought up a hit for a headshot for a 715 00:43:18,840 --> 00:43:22,960 Speaker 1: totally different person, a real estate agent in San Diego 716 00:43:23,160 --> 00:43:28,480 Speaker 1: named Dan Becker, same picture, different guy. So when contacted 717 00:43:28,520 --> 00:43:32,239 Speaker 1: by McMahon, Becker was astonished to find his photo had 718 00:43:32,239 --> 00:43:34,719 Speaker 1: been used for a bogus LinkedIn profile. He had no 719 00:43:34,800 --> 00:43:38,880 Speaker 1: connection to it. Obviously, strange things were afoot at the 720 00:43:38,880 --> 00:43:43,080 Speaker 1: circle K. This was reinforced when McMahon repeated the process 721 00:43:43,160 --> 00:43:46,480 Speaker 1: on a LinkedIn profile of a different supposed a Sinqua 722 00:43:46,600 --> 00:43:51,200 Speaker 1: executive named Michael Reid, not the baseball player. I get 723 00:43:51,200 --> 00:43:54,600 Speaker 1: the feeling that the Sinqua scammers were just copy and 724 00:43:54,719 --> 00:43:58,759 Speaker 1: pasting content from all over the web to fill out 725 00:43:58,840 --> 00:44:04,279 Speaker 1: there supposed in corporate website. Anyway, that reverse search of 726 00:44:04,400 --> 00:44:08,080 Speaker 1: that head shot pulled up another head shot of another 727 00:44:08,200 --> 00:44:11,600 Speaker 1: San Diego based real estate agent, a guy named Will Fagan, 728 00:44:11,840 --> 00:44:15,200 Speaker 1: who actually sometimes works with Dan Becker, the guy whose 729 00:44:15,200 --> 00:44:19,560 Speaker 1: face was being used for Steven Adler. Fortune magazine investigated 730 00:44:19,600 --> 00:44:23,480 Speaker 1: the new Assinqua and published a great piece about it 731 00:44:23,520 --> 00:44:27,880 Speaker 1: titled the Venture capital Firm that Wasn't There. The magazine 732 00:44:27,880 --> 00:44:31,000 Speaker 1: pointed out that the press releases were filled with information 733 00:44:31,040 --> 00:44:35,319 Speaker 1: that was unverifiable. Dan Primac, who is the writer of 734 00:44:35,360 --> 00:44:39,360 Speaker 1: that piece, wrote about contacting the SEC to find out 735 00:44:39,520 --> 00:44:44,120 Speaker 1: if this Assinqua Ventures firm was registered with the SEC, 736 00:44:44,520 --> 00:44:47,680 Speaker 1: and it wasn't. If it were a legitimate business, it 737 00:44:47,840 --> 00:44:51,680 Speaker 1: certainly should have been registered. One press release claimed that 738 00:44:51,719 --> 00:44:56,040 Speaker 1: the company had held an investment series fundraising round and 739 00:44:56,160 --> 00:44:59,600 Speaker 1: raised a hundred twenty five million dollars. But a company 740 00:44:59,600 --> 00:45:02,799 Speaker 1: of that eyes would absolutely be required to register with 741 00:45:02,840 --> 00:45:07,640 Speaker 1: the SEC. But nope, there was nothing there. Furthermore, several 742 00:45:07,680 --> 00:45:10,880 Speaker 1: of the executive bios listed in the management team page 743 00:45:10,880 --> 00:45:15,080 Speaker 1: of the company's website were clearly plagiarized. One such bio 744 00:45:15,239 --> 00:45:18,720 Speaker 1: for managing director Peter Arnold turned out to be lifted 745 00:45:18,800 --> 00:45:22,880 Speaker 1: from the late venture capitalist and reality TV star Russell 746 00:45:23,080 --> 00:45:28,560 Speaker 1: Armstrong's bio. Not exactly subtle. Prime X piece pretty much 747 00:45:28,840 --> 00:45:32,440 Speaker 1: gutted a Sinqua. He detailed how he got into email 748 00:45:32,480 --> 00:45:35,640 Speaker 1: contact with the supposed employee of the company and how 749 00:45:35,640 --> 00:45:39,800 Speaker 1: he received misinformation in return. He hypothesized that the venture 750 00:45:39,880 --> 00:45:42,480 Speaker 1: might be run by one of Hugh's associates in an 751 00:45:42,520 --> 00:45:46,759 Speaker 1: attempt to get another scam going. The piece published in September. 752 00:45:47,280 --> 00:45:52,600 Speaker 1: Shortly afterward, the Assinqua website was offline and emails sent 753 00:45:52,680 --> 00:45:57,200 Speaker 1: to Asinqua addresses bounced back as undeliverable. So it's quite 754 00:45:57,200 --> 00:46:01,080 Speaker 1: possible that the journalistic investigation helped shut down this particular 755 00:46:01,120 --> 00:46:04,880 Speaker 1: instance of this particular scam, possibly before they could actually 756 00:46:04,960 --> 00:46:09,480 Speaker 1: scam anyone out of any money. That million dollar investment 757 00:46:09,560 --> 00:46:13,520 Speaker 1: round might be just pure fiction. So I think the 758 00:46:13,560 --> 00:46:17,920 Speaker 1: moral of this story is that investors need to be careful, 759 00:46:18,000 --> 00:46:22,480 Speaker 1: as do prospective employees, not just in the startups that 760 00:46:22,640 --> 00:46:26,440 Speaker 1: interest them, but also in the very venture capital firms 761 00:46:26,480 --> 00:46:31,560 Speaker 1: that aggregate investments. Investments are inherently risky to some degree. 762 00:46:31,840 --> 00:46:34,200 Speaker 1: You don't know if the startup is going to succeed, 763 00:46:34,719 --> 00:46:39,359 Speaker 1: and that success depends on a lot of different factors 764 00:46:39,400 --> 00:46:42,040 Speaker 1: to really fall in place, from having the right leadership 765 00:46:42,400 --> 00:46:45,480 Speaker 1: to having a solid business plan, to offering a product 766 00:46:45,480 --> 00:46:49,279 Speaker 1: that people actually want or need, and more. Some of 767 00:46:49,320 --> 00:46:52,800 Speaker 1: the startups will become big, though sometimes that's due to 768 00:46:52,880 --> 00:46:56,480 Speaker 1: multiple investment rounds rather than the company is actually becoming profitable. 769 00:46:57,160 --> 00:47:00,560 Speaker 1: But the various big stories tend to fee into that 770 00:47:00,800 --> 00:47:04,600 Speaker 1: fear of missing out the old fomo and the money 771 00:47:04,880 --> 00:47:08,000 Speaker 1: will often follow as a result. It's just important to 772 00:47:08,040 --> 00:47:11,640 Speaker 1: ask tough questions and to be extra cautious when you're 773 00:47:11,640 --> 00:47:15,560 Speaker 1: dealing with something that is unfamiliar to you. That gap 774 00:47:15,640 --> 00:47:18,480 Speaker 1: in your knowledge might be just the thing that causes 775 00:47:18,560 --> 00:47:21,680 Speaker 1: you to make a mistake. Next thing, you know, the 776 00:47:21,719 --> 00:47:24,680 Speaker 1: person you trusted with your money is facing fraud charges 777 00:47:24,719 --> 00:47:29,480 Speaker 1: in court. Not a great experience, okay, hope you enjoyed 778 00:47:29,520 --> 00:47:32,080 Speaker 1: that episode. I know it was a rerun, and again 779 00:47:32,120 --> 00:47:36,759 Speaker 1: I apologize, but some things are just beyond my control. Uh. 780 00:47:37,040 --> 00:47:39,400 Speaker 1: In fact, very little appears to be within my control, 781 00:47:39,440 --> 00:47:41,799 Speaker 1: but I'm gonna I'm gonna work on that. Right that 782 00:47:41,960 --> 00:47:46,360 Speaker 1: this is I'm really determined to make this all a 783 00:47:46,440 --> 00:47:49,680 Speaker 1: great year. So y'all, I hope you're doing well. We'll 784 00:47:49,719 --> 00:47:52,040 Speaker 1: have new episodes the rest of the week, and I 785 00:47:52,040 --> 00:48:02,279 Speaker 1: will chat with you again really soon. Text Stuff is 786 00:48:02,320 --> 00:48:05,480 Speaker 1: an I Heart Radio production. For more podcasts from I 787 00:48:05,560 --> 00:48:09,200 Speaker 1: Heart Radio, visit the I heart Radio app, Apple Podcasts, 788 00:48:09,280 --> 00:48:11,280 Speaker 1: or wherever you listen to your favorite shows.