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Comment by JumpCrisscross | Hacker News Reader

> They have a product. How can such a company be a fraud?

Fraud, put simply, is lying with material consequences. If Apple said their iPhone can fly you to the moon, and you bought it on that basis, you were defrauded. That the product does a bunch of other useful things is irrelevant.

That said, I agree with you in us having insufficient evidence to label WeWork a fraud. They’re aggressively disclosing their weaknesses. No evidence of deception.

Disclaimer: I am not a lawyer. This is not legal advice. Don’t toe the line with fraud.

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> If Apple said their iPhone can fly you to the moon, and you bought it on that basis, you were defrauded.

Or possibly, if you sued Apple for that, your suit would be dismissed because Apple's statement was "mere puffery": an advertising claim so outlandish that no reasonable person would be expected to take it seriously.

A famous example is Leonard v. Pepsico, Inc., where a Pepsi TV commercial showed some of the things you could get by redeeming Pepsi Points that you earned with your purchases. It begins with:

         T-SHIRT
     75 PEPSI POINTS

and ends with a high school student vertically landing a Harrier fighter jet in the school yard, opening the cockpit with no helmet on but a Pepsi in hand, and laughing "Sure beats the bus!"

     HARRIER FIGHTER
  7,000,000 PEPSI POINTS

You could also buy extra Pepsi Points for ten cents each if you didn't have enough for the prize you wanted.

John Leonard wanted that Harrier, so he sent PepsiCo a certified check for $700,000, minus $1.50 for the 15 Pepsi Points he already had, plus $10 shipping and handling.

When PepsiCo returned the check instead of sending his jet, he sued. Here's the commercial and the rest of the story:

https://www.youtube.com/watch?v=ZdackF2H7Qc

https://en.wikipedia.org/wiki/Leonard_v._Pepsico,_Inc.

https://en.wikipedia.org/wiki/Puffery

(I'm not commenting on WeWork, only on the lunar iPhone example.)

> if you sued Apple for that, your suit would be dismissed because Apple's statement was "mere puffery"

Agreed. The example was facetious.

The underlying point, that a company producing a useful product can still commit fraud, to customers and/or to investors, stands.

As, this is why so many businesses can claim to be the "Worlds Best".

that seems more like an exaggeration than a fraud if the product does work for the most part no?

> that seems more like an exaggeration than a fraud if the product does work for the most part no?

If you bought it to go to the moon, it doesn’t work as promised. If the lie was wilful, that’s honest-services fraud.

Less facetious of an example: you sell a company that makes lots of money but has a material liability on its books. The liability can’t kill the company. But you intentionally hid it from a buyer. The company still generates all those dollars. But your hiding this material fact from the purchaser is fraudulent.

Disclaimer: I am not a lawyer. None of this is legal advice.

It's not about the Wework product "office space" being fraud, but about the product "wework shares" being sold as a good investment which is questionable

> about the product "wework shares" being sold as a good investment which is questionable

Investments can be shoddy without being fraudulent.

Nowhere do they say it is a good investment. You can’t do that in an S1. Investors decide.

Securities offerings are never suggested that they’re a good investment; the same way that a software stack doesn’t suggest it’s the best thing for your use case.

It’s up to you to evaluate the investment in question and decide whether you wanna invest.

(Today I learned to “toe” the line... not to “tow” it!)

https://en.wikipedia.org/wiki/Toe_the_line

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