UsingMiles Founder Arrested | Hacker News Reader

UsingMiles Founder Arrested

dailycamera.com

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Unfortunately, our company is one of many victims that have been identified through an investigation into money raising activities made on behalf of Mr. Austin Veith. Victims include a few investors in UsedTunes (also known as uMedia), Jon Nordmark who is UsingMiles CEO, Wambo Commerce, and a number of other individuals who have invested in Austin or his companies in the last 5 years. Mr. Veith has no current association with TravelFli / UsingMiles.com, not as an employee nor a shareholder.

The situation has no effect on UsingMiles.com day-to-day operations, and our passionate founder and employees are 100% focused on building a wonderful new world-class travel service! In fact, UsingMiles.com is the ONLY frequent flyer travel tool that was just named one of Entrepreneur Magazine’s “100 Brilliant Companies.” We are honored to accept this accolade.

http://www.entrepreneur.com/article/219660

Moving forward, we intend to fully cooperate with the law enforcement and hope that the innocent people involved in this situation can find justice. We thank you for supporting us through this process.

Wow. This reads like a press release. At the very least it was copy-pasted either here or at [1].

[1] http://milepoint.com/forums/threads/usingmiles-travelfli-fou...

I've had the misfortune of working for someone in New York City who was running a similar operation. But I think he stays just inside the law. He announces that he has a seed fund for startups. He spends all of his days pitching investors. He then pitches his ideas, usually working in concert with one or more partners. He then hires 2 or 3 programmers to work on the idea. He pays himself very generously for his leadership skills. For one of his projects, he might raise $100,000 in 3 months and then pocket $20,000 as his fee for providing leadership. The rest goes to the programmers. And he might have 3 or 4 such projects going at the same time.

Technically, this is not a scam. He raises money and spends most of it trying to build startups. But I did have the sense that his focus was very different than what I expect of most of the Hacker News crowd. I had the sense that he didn't really give a damn whether any of his projects succeeded. He was making a very good living just raking in dollars from investors. And of course, if the investors are dumb enough to give money to him, then in some sense they deserve what they get.

I recall that for all of the many meetings we had, he never mentioned customers a single time. He only talked about investors. He talked a lot about "the deck" (the PowerPoint presentation he would use to dazzle potential investors), which he constantly tweaked and polished. His only interest in the programming was to show some progress so that he could ask for more money. And then after a few months he would claim that the idea had failed to show traction, and he would move on to the next idea.

Any boom will attract a certain number of parasites. I had the impression that he was manipulating the rhetoric about a tech boom in New York City to sell the idea that investors needed to get in on the action, via him.

It was intriguing to realize that this was even a possibility. For me, when I'm part of a startup, I'm generally willing to sacrifice some of my current income for the sake of seeing the startup maybe succeed. But this guy was playing the opposite game.

He was very smart. And he invested enough of the money raised that no one could accuse him of running a scam. And yet, I had the impression he was just barely legal -- just barely doing the minimum so that no one could accuse him of running a scam.

He did have one success in his past, which I think made his whole operation possible. He was sort of like the aging actor who had a popular show 20 years ago and nowadays does infomercials. That one hit gave him the credibility to run his almost-scam.

Anyone involved in the startup world should be aware of operators like this.

If he was staying under $200K per investment/company, it might be for legal reasons.

So in comparison, if law enforcement has an "economic crimes unit" and can "follow the money" and get to the bottom of this, why hasn't anyone in the financial industry/wallstreet been arrested/prosecuted for the financial collapse?

Because Wall Street runs the government. Haven't you been paying attention?

Exactly.

Power. It works.

Wall Street is running a much more complex game with many more shells under which the peanut could be. They also have many old companies run by people who've been focused on refining their game/system for decades if not centuries, if you take into account the transmission of knowledge through books and mentorship. And as Zed mentioned they are tightly integrated with government leaders.

Because the activities of Wall Street and financial industry operate in a "gray area". They game the system "by the rules" (or at least by the "exceptions").

When Goldman Sachs creates a fund of stocks at the direction of a private investors who intends to short these stocks, determining the illegality is a more difficult problem (http://www.telegraph.co.uk/finance/newsbysector/banksandfina...).

The crime of this guy seems to be taking a larger cut of the money going through his hands than he claimed. If he was enough of a "rain maker", he might conceivably have openly demanded the money that he was skimming and then there would be no crime. But he either wasn't a big enough "fish" or simply a sociopath who couldn't help lying and stealing even when he was making bank.

I think a number of folks argue that the most successful businesspeople "surf the edge" between normalcy and sociopathy. I would add that when the business environment is closer to "bubble-dom", the true sociopaths can rise but when the "tide goes out", these characters go to jail - we saw that in the last two crashes.

http://en.wikipedia.org/wiki/Psychopathy http://en.wikipedia.org/wiki/Antisocial_personality_disorder

And, yes, "because Wall Streets runs the country" is fine simplification of the situation too...

Because there's a difference in purposely defrauding someone and unknowingly defrauding someone. Wallstreet kept just as much bad loans and dumb derivatives deals on their books that one was liquidated, several were taken over and some others had to change business models.

I don't think Wall Street needs to break any laws when Congress and the Federal Reserve are telling them "Here's a pile of money, please exploit it for your own personal gain. And be sure to send us any unpaid bills."

I submitted this with a "TechStars Boulder 2008" part added to the title, why was it removed? I see "YC" references to companies in titles all the time so isn't that relevant info?

The reason companies funded by YC are often called out as such is that this site is run by YC. But almost all startups have multiple investors, so it would get pretty unwieldy if they were all named every time a startup was mentioned. There's no reason to do it unless the story involves the investor, which is not the case here.

I think it was nice they removed the TS 2008 because the story is not related to TS as much as the founder himself. This shows that YC does not want people to talk negatively about their competitors.

At the same time I do not think just because this is a site ran by YC that we should not have titles with TS in them. You could promote TS companies here all day, it will not make a difference for YC.

I hate to see investors' money wasted on "hookers and blow", when there are so many startups out there which could really use the money to grow their legitimate operations.

"It's like facebook... but with hookers and blow! You know.. Social."

Sad story. Bad apples are everywhere, and when you work with a hundred entrepreneurs, 99% are genuine, and then you get the con artist. It's so hard to spot at first.

Will this effect usingmiles.com recent $2.7 million round of funding? http://techcrunch.com/2011/04/06/usingmiles-raises-2-7-milli...

I'd guess that Nordmark taking over the CEO role from Veith was (1) prob a condition or recommendation of the newest round of investors (because Nordmark is more experienced and has the success of eBags under his belt), and (2) the event that enabled Nordmark to gain much more power and transparency over the books, which in turn was the final straw leading to the charges against Veith. This is just speculation based on the publically reported info we've seen, however, and I obviously could be wrong. Since Nordmark is clean and has succesful track record and UM got all the extra cash in April, that all seems to be a net positive for the company. I think the fundamental service delivered by UM is a good one, and unlocking the value in otherwise unused frequent flyer miles is especially helpful to travellers in a recession. Veith is also innocent until and unless courts find otherwise. And I think the TechStars folks are good at picking talent combined with promising venture ideas.

Considering he has somewhat of a history, is this a lesson in vetting for angel investors and accelerator programs?

what do you need a $10K apartment in NYC for? That's pretty much penthouse territory.

I mean I can see if you are already making millions...but if you are just a startup that should be a big red flag to investors.

Legitimacy and a smile (or lack thereof) are all that matter.

Bummer.

Someone -- I think a startup founder I know and that people have heard of, but I could be wrong -- related to me that when he got a series A or B, the background check was so thorough that the investors noticed he'd accidentally let his drivers license lapse and had an unpaid parking ticket.

I love this part of the article: "In 2010, Nordmark paid $25,000 for a patent on a new online digital used music and book website that Veith was pitching, dubbed UsedTunes.com. The site exists but isn't operational."

This is further proof that raising money does not make one inherently more trustworthy. Unfortunately, on July 1, California law will reflect that very notion.

http://www.quora.com/Aaron-Greenspan/In-Thirty-Days-Payments...

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