SEC charges YouPlus and CEO with defrauding investors
sec.gov
sec.gov
> Advice to potential investors and partners - check all numbers from CEO - it’s easy and you will be surprised.
> Facts about Youplus:
> - 4+years old - has no users and never had traction in both USA and India - change of direction every 2-4 weeks - no one cares about results
> CEO has a lot of energy and love to pitch whatever in his head to everyone in the office for hours in endless meetings. What he completely lacks is a solid vision, execution and just a common sense. His ego is tremendous — he despises other people’s opinions and if he asks for your opinion the only expected answer is “Awesome!”.
> Youplus is a toxic place to be for everyone with a self-respect.
(from October 2018)
> First of all they do not pay on time
> You can get fired in a second because they don't need you anymore
> Promises are not kept most of the time
(from Jun 2017)
https://www.mayoclinic.org/diseases-conditions/narcissistic-...
He would let his excitement for some new idea take hold of him, and he would share it with everyone without first taking the time to sit down and reconcile how the feature fit into the rest of the app, what problems it solved, possible alternative solutions to that problem, the cost and complexity of implementing the feature, how the feature should be prioritized, etc.
This stuff and more is what sets good product people apart from mediocre product people. The problem is that it's all invisible and optional, so mediocre product people aren't even aware they're not doing it, and thus it's easy for them to believe they're great product people when they really aren't.
At some point he got the message that he needed to stop disrupting the team with these frequent ideas, so he switched to writing them out in gigantic Google Docs that he'd send to people. At least that was async, so it was less interruptive than him stopping at your desk, but it was still super time-consuming to read his docs. Eventually the entire team started ignoring them.
We were a very small company, so it wasn't hard to be nimble, but it was exhausting to keep changing features or products we were working on, or never having the opportunity to satisfyingly complete anything we worked on. It was all the typical "lean startup" phrasing, disrupt, move fast and break things, "pivot", the things you'd see as jokes in that tv show Silicon Valley. Our CEO literally ended every single slide presentation with "We're going to change the world."
I don't remember how many times we "pivoted" over my five months there, but every single time it was just a new feature, we weren't actually changing anything fundamental about the business proposal, the product, or the customers. We also did not have solid metrics or any way of measuring the success of new features, nor did we have any information that proved, for example, existing customers wanted the new features (most obvious one was a "like" button). The overall feeling was our CEO was just floundering, he didn't have any coherent strategy.
Funny thing was, none of this made me leave. I finally decided to quit when he hired someone who started scheduling meetings at 9am and nagging me to be in at 9am despite performing well and having explicitly agreed to a much looser schedule when I started.
Oddly, we also went to Google once for a hackathon. IMO our CEO fucking RUINED that trip. The hackathon was supposed to be focused on using Google Play Store in some capacity, I honestly can't remember it all because this was nearly a decade ago. Our CEO was with us and insisted our team make a Google Play app for 404 pages (we were supposed to change our 404 page during that sprint, separate from the hackathon). And if that sounds dumb and incoherent, that's because it was. I didn't even know what we were building, and I'm pretty sure we left early to go work on our 404 page or some stupid shit like that. I'm not joking, and I remember the blank stares of others in the room when our CEO was trying to explain the idea of what we were going to build, nobody got it. We didn't get it either.
Sorry, really meandering comment here but I completely forgot about that experience until I started thinking about how that CEO didn't really know how to focus or communicate a strategy.
Yikes
Seems to be just regular run-of-the-mill fraud.
Fake it till you make it is something to direct at your customers, or at your product's implementation, not at people who are giving you their money, who are protected by the SEC.
I assume that the firm will never be able to make a positive return for its investors, which is why they invoked the nuclear option.
I’m surprised the DOJ hasn’t charged them with a crime yet. The money the SEC is seeking has to be long gone right?
When both civil SEC charges and criminal charges by DOJ emerge out of the same act, the former is often well ahead of the latter, so, when civil charges are filed without concurrent criminal charges, one shouldn’t read too much in to it.
Though, as a reply points out, that separation does not actually apply in this case.
EDIT: corrected error of ordering pointed out in a reply, and expanded somewhat for clarity of intent.
> In a parallel action, the U.S. Attorney’s Office for the Northern District of California today announced criminal charges against Shamim.
A number of comments are asking why the investors do due diligence in checking the numbers.
Before Series A (i.e. seed, seed+, bridge), asking for audited financials is quite uncommon. The startup investment space largely works on trust, honesty, and speed. It also works on 'stamps of approval', previous ventures, accelerators (500, YC), investor networks (gain one, you gain a few others by association).
It's easy to say, they should always ask for diligence/auditing, but that slows things down in a space where speed to delivery means something. Less time you can spend on fundraising the better and even w/o diligence you can spend way too much time fundraising.
Not saying it's perfect, but it's the side of the double edge sword that's in play. If defrauding happens too much then enough bad eggs will have ruined the pot and audited financials will be required as a general practice.
This communication says that the CEO only produced the false bank statements when he was pressed about it. Seems like somebody snapped out of it, did the due diligence that should have done in the first place before signing a check, and realized that this was all smoke and mirrors.
Theranos managed to suck in billionaires like Rupert Murdoch, Tim Draper and Larry Ellison, executives at Safeway, the Walton Family and others. All without working technology or a single peer-reviewed paper regarding their work.
It happens all the time, and is happening as we type this. How?
Did they see the product in action? A concept? Or all they saw was powerpoint and empty words
I agree, it's fraud, but I sincerely believe there's a point where "don't blame the victim" stops making sense.
> to have developed a machine-learning tool to analyze videos on the internet
Ah yes of course.
This is an unusual ask. Founders forging bank statements simply isn’t common enough to merit it.
At the current startup i am at, we do yearly audits that we share with our investors. We have nothing to hide and our growth is real.
If company doesn't want to do an audit, they are hiding something. Founders forging stuff is more common than you think. I've personally seen shady accounting at two startups like fake contracts were nothing of value was exchanged but saw the revenue booked. One of the startups was a vendor to homestore.com were the CEO went to jail cooking the book but we were never investigated being a private vc backed company. Though investors did fire the founders and executive team after they forced an audit. SEC prosecuting these cases is quite rare with privately held companies. This is the second case that i know of.