I understand how one could think you'd get away with it if one were lying to investors who might lack the ability to verify the claims
But actually selling the company? How would that possibly work?
> JPMorgan became interested partly because of the potential it saw in Frank’s supposedly huge list of satisfied clients. The bank believed those future college graduates could become lifelong bank customers
Generating a fake user accounts database would only conceivably work if you expected the purchaser to never attempt to contact any of the business's users, which seems a ludicrous expectation.
For $175m of fraud, it's definitely worth to set that up.
The core problem here is - the US lacks the ability to realtime verify identity against a centrally government controlled DB. US would never allow this under privacy rules, but that's what it would take to really identify a particular person.
Any sentence of this form needs to be treated with the utmost skepticism these days.
Having SS number doesn't get you contact details and thusly at the mercy of the one who wants to fraud you
https://fortune.com/2023/04/11/synthetic-data-millennial-fou...
> At JPMorgan’s insistence, Javice said, she completed the task “over a couple of days and nights.” The professor uploaded Frank’s “customer list”—which now contained the synthetic data—to Acxiom on the morning of Aug. 5, the bank said. Acxiom analyzed the data and provided its report to JPMorgan later that evening. Acxiom destroyed the underlying data as its contract required, Javice said. Three days later, on Aug. 8, JPMorgan agreed to buy Frank for $175 million. Acxiom declined comment.
Analyzed the data and gave report the same evening? What the hell? How on earth Acxiom is not on the hook? Is incompetence a defence? And how can they avoid going bankrupt if they choose that defence because nobody will give any work to a company that admits it? I'm now more intrigued about the Acxiom side of story.
I feel like this is, roughly speaking, the system working as intended: Minimal friction to avoid slowing down the 99.9% of deals that don’t involve fraud, and reasonable deterrence for the remaining 0.1%. I’m sure there are lots of ways to prevent deals like this from closing in the first place, but I doubt most are worth the cost.
Given the Trevor Milton pardon, I wouldn't count on that. At this point, you can't rely on legal remedies, you just have to be lucky that the person fucking you over doesn't have the right kind of friends.
1. Ask them to let a few of my men to dig into the source code and database in their presence.
2. Hire a company to do investigations, speak with their employees, former employees, customers, investors and businesses partners
3. Use an escrow service, a trusted third party which will verify their claims
4. State in the contract that if the deal goes through and if I discover more than 1% of their claims is fake, they own me double the money
But in this case, the article states JP Morgan was sent all the fake data. They just didn't care to verify it. That is either stupidity or JP Morgan have some careless employees which don't risk anything if their employer loses lots of money because they don't do their jobs, so it might be nepotism.
https://fortune.com/2023/04/11/synthetic-data-millennial-fou...
Like with onecoin, all they had to do was have a blockchain and it would have been the same standard of non-indictable fraud as everyone else
Here all she had to do was harvest from data brokers
"Knowing that JPMC would have access to Frank’s real and much more limited student data after the close of the acquisition, Javice and another high-ranking Frank executive (the “Frank Executive”) began an effort to create a list of real names that they could pass off as Frank’s customers. To that end, the Frank Executive arranged for Frank to pay $105,000 to a third party data compiler for its in-college student data. Javice arranged for Frank to pay $75,000 to a different data compiler to augment the list the Frank Executive bought with email and phone number data."
But I think the real reason is those people attempting fraud are fundamentally psychopaths: they can't think correctly about a future where they're being caught. They fix the present, one lie at a time, and get an immediate, narcissistic personal reward every time they fool someone.
They also think rules don't apply to them, and most of the time they're right, as they most often get away with it.
Seller probably had leverage to negotiate limited reps and warranties with no earnout and more cash upfront along with saying no to pre-close diligence.