[HN Gopher] A sleuth's guide to the coming wave of corporate fraud ___________________________________________________________________ A sleuth's guide to the coming wave of corporate fraud Author : drooby Score : 60 points Date : 2022-11-13 17:13 UTC (5 hours ago) (HTM) web link (www.economist.com) (TXT) w3m dump (www.economist.com) | ramesh31 wrote: | Interesting to see this play out in the crypto world in real | time. CZ is coming across as the only legit player left in the | space. And it seems hard to imagine he'd be putting a spotlight | like this on himself if things weren't airtight over there. Looks | like Binance will be the winner take all. | Animats wrote: | He doesn't even have a business address. | moralestapia wrote: | How does he operate though? | | Where does he send/receive fiat? | lazide wrote: | Normally, Tether. | | Another steaming stinking bucket of goo no one wants to | look too hard at, for fear it will actually be shit instead | of the maple syrup they keep being promised. | [deleted] | buitreVirtual wrote: | I don't think he is chasing the spotlight more than necessary | to promote his business. Besides, chasing the spotlight does | not imply honesty. Just look at SBF. | skinnymuch wrote: | SBF was in the spotlight. Possibly more than any other crypto | person. If applied to CZ, it means he is a fraud too. To think | his stuff is airtight makes no sense when there isn't | transparency. | TacticalCoder wrote: | Coming or actual. Chamath Palihapitiya just said that the current | SBF/FTX/Alameda fiasco goes much further than just one man and | FTX. | | He says that several SV firms and VCs have been working on | several of the shitcoins in which SBF was a cofounder and pumped | and dumped or which SBF just pumped and dumped (already before | FTX even existed) without being involved in their creation. | | SBF had its hands into a lot of things, including Solana and | Serum (SRM), which represented $2.2 bn in USD when FTX went down | (but which since crashed by 75% or something). | | SBF owns 9% of RobinHood. | | I'm not saying it, Chamath Palihapitiya is. Here's a recent talk | between him and Coinbase's CEO. Jump at 20 minutes when it starts | on crypto: | | https://youtu.be/Id7cNqwqt1I | | I do personally think Chamath Palihapitiya is right and we | connect the dot with the article from TFA, this does indeed go | much further than just SBF. | | Another one just for the gigs I recently read (facts needs to be | checked): SBF's mom (lawyer and teacher at Stanford) ran a | fundraising political campaign rooting for Biden. A few days | after Biden announced he was running, SBF was apparently the | biggest donor. Will they hand that money back to people who were | scammed? | | Speaking of parents who raised ethical kids... Elizabeth Holmes, | who defrauded investors, had as a parental example a father | working at... Enron apparently. Just a coincidence of course. | Daddy wasn't aware of anything. And he can be very proud of the | way he raised his daughter. | | In french we say it's "un panier de crabes" (a pack of crabs). | | Thanks to these guys' examples I know how to not raise my kid. | [deleted] | lifeisstillgood wrote: | What if we paid auditors by the fraud discovered. That auditors | finding fraud and other misdeeds get the highest seniority on any | assets left. | | I mean, there has to be some answer to the problem of an auditor | that says "I don't like the way you treat this income stream" and | the CEO says "we will never work with you again and I will make | sure everyone I golf with never will again." | ipython wrote: | That's kind of how the SEC handles whistleblower compensation. | See https://www.sec.gov/news/press-release/2022-125 | [deleted] | nostromo wrote: | I hope I don't regret saying this, but so far, this recession / | slowdown has been very needed and will help the US economy grow | in more sustainable ways going forward. And it's happened without | too much pain in the broader economy. | | We way overdid Covid stimulus, which helped inflate bubbles like | you saw with crypto, pouring billions into the hands of criminal | organizations like FTX. | | We had cheap money flowing for too long with near-zero interest | rates, propping up many zombie enterprises that shouldn't have | been propped up to begin with. | | Salary growth is great, but we all have seen a proliferation of | bullshit jobs with ridiculous salaries in the past two years. | | All of these trends have started to correct, and it'll be better | for the long term. I just hope nothing systemically important | breaks before we're through the worst of it. | pjc50 wrote: | Recession is, in and of itself, the opposite of growth. That's | how it's defined. | | You can make an anti-growth argument, possibly on carbon | emissions, but a recession cannot ever be good for growth. | dv_dt wrote: | I really don't have any belief that the faults in our economy | was due to easy money. Under scarce money or easy money the | same class of decision makers are still making poor allocation | choices. There are no fundamental changes associated with a | recession that would correct that imho. | cavisne wrote: | The past few years have been great for scammers though | | https://www.justice.gov/opa/pr/us-attorney-announces- | federal... | | There is surely some GDP gain from not ploughing 250m of | taxpayers money into lambo's. | Silverback_VII wrote: | I'm not sure about that. I see the economy as a giant engine | made out of the flesh of millions of humans. The guy pushing | the accelerator or not must truly feel like God hearing the | roaring of this giant flesh engine and affecting the fate of | so many people. | nimbius wrote: | "and will help the US economy grow in more sustainable ways | going forward" | | how? capitalisms defining hallmark is a ten year cycle of | boom/bust. the last solution in 2020 was a bailout and | forgiveness for virtually all commercial covid debts. prior to | that it was a massive bailout and payout checks to taxpayers | along with a scorched earth foreclosure wave. at some point the | argument comes across as an alcoholic that repeatedly crashes | cars and promises to learn and grow from it. | | real wages are stagnant, homes are still unaffordable, rent is | skyrocketing, healthcare now routinely sells insulin for $200 | and everything from energy to food is still rising. ive a tough | time believing corporate fraud is a silver lining. | hedora wrote: | In the US, all of the problems you mentioned (or analogous | issues) were solved during the New Deal era, which set the | stage for relative economic stability post-WWII. Most of the | laws / institutions from that time were eliminated in the | last 3-4 decades. | | Anyway, the solutions are well understood. Any decent US | history textbook contains them. | Retric wrote: | People blame stimulus spending, but the reduction in real | economic output from COVID also has knock on effects. | | Expensive condos etc derive most of their value as a symptom of | a much larger and extremely productive economic system which | got disrupted. Suddenly people start reevaluating basic | assumptions and markets adjust in ways more complex than a | simple boom bust cycle. | kjellsbells wrote: | (Archive link for parent article, for anyone who cant get | past the paywall: https://archive.ph/uk2L8) | | I agree with you, and in particular I have a worry that | corporate real estate is a bloodbath whose extent is not yet | revealed. WFH has destroyed the need for knowledge workers to | cluster in a downtown office and all CFOs must be wondering | how they can get out of their leases as soon as they expire, | not only to save some costs but also to keep workers who like | WFH happy (played right between HR head, CEO, and CFO, it | could be touted as a benefit to employees that also saves the | company money) | | SFO vacancy rates are about 15% right now (source: | https://www.nar.realtor/blogs/economists-outlook/metro- | offic...). NYC, 13%, double pre-COVID. See the link for the | data source. | | There will be many ways to read this data and if I knew which | way the wind was blowing I'd obviously be out there making a | killing on CBRE instead of typing this post, but if this | trend stays, then cities will undergo huge shifts again. I | don't predict the death of the city (cities have gone from | being based on geographic confluence, to defensive | importance, to transport hubs, to industrial centers, to | mercantile centers, to confluences of knowledge workers, and | they will adapt again) but it's goijng to be a bumpy ride. | moistly wrote: | I do not believe our economy's output exceeds that of 2019, | pre-Covid. We still have supply chain issues up the wazoo. We | still have disease taking out employees en masse, and for | weeks at a time. Potential customers are generally in | worsening financial condition. I simply can not believe that | conditions are such, that the stock market should have a | higher valuation than it did in 2019. | Retric wrote: | A dollar today is worth ~15% less than a dollar from 2019 | so a stock that's nominally worth the same today would | actually have taken a significant hit. Which really should | be part of these comparisons. | ericmcer wrote: | The economic fallout is correctible, but fixing the loss of | faith in the foundation of our economy, that diligent work will | be rewarded with comfort and stability, will be harder. | sammalloy wrote: | > The economic fallout is correctible, but fixing the loss of | faith in the foundation of our economy, that diligent work | will be rewarded with comfort and stability, will be harder. | | I think this is an archaic, pre-21st century mindset. | Advanced, industrial, technological societies should be able | to guarantee comfort and stability for all people regardless | of work. In the modern world, we should work because we love | or enjoy it, because we want to contribute to society, and | because it brings meaning to our lives and the lives of other | people. We should not work, on the other hand, to be | "rewarded" in a zero-sum game competing with others, to the | detriment of the rest of the planet. We really need to change | the way we think about this. The most productive workers | aren't people working for a reward, they are those who love | their work and are happy with the comfort and stability they | already have. It's 2022 going on 2023. The idea that we | should work based on scarcity rather than abundance is | completely out of date and no longer supported by the | evidence. This is the kind of have and have not mindset that | needs to disappear. Nobody should have to work to obtain | comfort and stability. | lossolo wrote: | For this you first need robotic + AI revolution, without | this it's impossible. You need to replace significant part | of the workforce with robots. Every human needs different | resources/products to live, these resources have | complicated supply chains in which you have a lot of people | that do not enjoy their work but needs resources to keep | their family afloat, that's why this products are available | on the market. How many ppl like doing working in coal | mines? How many like working in factories for 12 hours | doing the same thing over and over again? | | I think what you wrote is a goal for our society but we | need minimum of many decades of technological advances to | even start really thinking about implementing this. We are | not there yet. | lazide wrote: | There are a whole lot of 'should's' in there, without a | whole lot of reason WHY all the people involved would want | to do that, when they could do other things instead? | | If everyone could work together effectively, and no one | would stab each other in the back, scam each other, lie to | look better, or just screw up, etc. then hey, maybe. | | But then we would already be in a better place? | | If you figure that people will occasionally do ALL of those | things if it benefits them (and sometimes when it doesn't), | then what you're describing is the most incredibly rich | target I can possibly imagine. | | Cheers! | ip26 wrote: | Nobody digs a ditch or works in a meat packing plant for | the meaning it brings to their lives. | | I'm not some consummate capitalist, but there is a | tremendous amount of necessary yet unrewarding work that | still has to be done by human hands, and I've never seen a | believable pitch for how that happens in these "post-work" | pitches. | PixyMisa wrote: | > Advanced, industrial, technological societies should be | able to guarantee comfort and stability for all people | regardless of work. | | Advanced societies can and should guarantee food and | shelter to all people regardless of work. | | They can't guarantee comfort and stability at all. | | > The most productive workers aren't people working for a | reward | | The most productive workers are the ones working under | crisis conditions. Not happiest. Most productive. | | > Nobody should have to work to obtain comfort and | stability. | | Should not? Maybe. They do anyway, because that's just | reality. | mschuster91 wrote: | > We way overdid Covid stimulus, which helped inflate bubbles | like you saw with crypto, pouring billions into the hands of | criminal organizations like FTX. | | Crypto was already a problem way before covid came out of a bat | cave - the problem is _not_ the stimulus package, these saved a | lot of lives, and they got to individual people, not | corporations. | | The actual problem was the expansive monetary policy that | virtually all major central banks followed since the 2008ff | crisis - well over a decade of injecting absurd amounts of | money is what caused the absolute bull run on real estate, | stock markets, venture capital backed crap (remember Yo?) and, | finally, once there was no other avenue for all that money | left, into crypto. | chinabot wrote: | These Bullshit jobs really need to be called out more, everyone | in a company knows who they are and they just piss off the real | workers who see themselves (rightly) as hard done by especially | when they are in their management chain or paid substantially | more. Every good HR departments and CEO should earn their money | by culling these the moment they are recognized and sanctioning | the Manager approving them. | datalopers wrote: | I'm not sure if this is fraud, or simply how VCs operate, but | we're going to see a massive collapse of SaaS startups and their | customers in the near future. This is why: | | 1) Tech valuations over the past ~5 years were based entirely on | annual revenue multiples. 25x was the norm, while 50-100x wasn't | hard to find. | | 2) Let's say your VC firm owns 5% of CompanySaaS, which you paid | $1M for, and the company is valued at 25x ARR ($800k * 25). | | 3) Now you invest $100k in CompanyWhatever. As their VC and | valued advisor, convince them they should spend $100k/yr | utilizing CompanySaaS's products. | | 4) CompanySaaS is now worth $900k * 25 (probably higher multiple | since revenue is growing so fast), or $22.5M, and you just turned | $100k into $125k. | | Rinse and repeat. It's a self-perpetuating bubble, and it's going | to come crashing down hard. It's already happened but they've | still got enough runway for another 6-24mos. | [deleted] | hedora wrote: | This would only be a bubble / ponzi scheme if a significant | fraction of B2B customers were currently backed by VC money. | | That isn't the case. Instead, these deals help bootstrap | companies. Late phase investors insist on seeing per-customer | revenue breakdowns specifically to avoid the issue you are | describing. | | It is likely that startups that are becoming revenue-dependent | in 2022-2023 are in trouble though. | lazide wrote: | A LOT of startup business comes from other businesses within | the same VCs portfolio. | keepquestioning wrote: | If this is true then it's eyeopening. I often wonder, who | _actually_ uses SaaS? | lazide wrote: | Quite a few companies do, if the SaaS has value to them. | The challenge is, which SaaS companies have real value, | and which ones have been working hard to LOOK like they | have value? | | In the wise words of Mr. Buffett - "It's only when the | tide goes out that you learn who has been swimming | naked." | | Well, the tide is going out. Time to grab some popcorn! | jrm4 wrote: | _So_ not hard to see from a purely theoretical standpoint; free | /open source or similar is always around the corner to eat your | lunch. | | Unless you can figure out "What, EXACTLY, is the thing that I | can charge them for -- meaning that they cannot get unless they | pay me for it," you're done. And that space is pretty small. | Not nonexistent, but small. | paxys wrote: | That's not how it works. If you invest $100K in a company and | ask them to spend all of that $100K to buy products from | another one of your companies, they will laugh at your face. | datalopers wrote: | It's an oversimplified example to illustrate how revenue- | multiple valuations lead to perverse but rational investment | strategies. | paxys wrote: | If you plug in realistic numbers in that example you will | see that yes, while network effects from your VC's | portfolio is definitely a thing, it isn't some crazy scam | that is due to collapse. | lumost wrote: | I'd be curious how extensive this is. Presumably the entire | ecosystem can't be running on VC... however I'm not sure how | much of it is pure VC. Are SaaS firms on average going to see a | 10% decline in revenues or a 70% decline? Or a 1% decline? | lazide wrote: | Definitely not all the revenue/ecosystem, but I'd be | surprised if it wasn't at least 25%. | [deleted] | metadat wrote: | https://archive.today/uk2L8 ___________________________________________________________________ (page generated 2022-11-13 23:00 UTC)