Silicon Valley can to be a place of great power and wealth, but the slightest thing can bring it down. From fake phone calls with bankers on the line to mountains of out-of-control lies, these one-time Silicon Valley darlings are no match for the law.
Here’s a look back at the tech executives convicted this year.
Nikola founder Trevor Milton was sentenced to four years for securities fraud
Trevor Milton has used his oversized personality to promote an ambitious idea: to disrupt freight with fleets of electric hydrogen semi trucks through his company, Nikola. His gravitas attracted partners and investors, including automaker GM. But when Nicola went public through a merger with a special-purpose buyout firm, Milton’s star (and the company’s stock) shot into the stratosphere.
It would be short lived. Within months of reaching the heights of his stock meme status, Milton was charged with fraud and federal investigations began. He would soon step down as founder and CEO, and his problems didn’t go away with his departure. Instead, Milton was charged, tried and found guilty of defrauding investors. This month, Milton was sentenced to four years in prison, although it is doubtful that his saga will end there. Milton is expected to appeal. — Kirsten Korosech.
Theranos founder Elizabeth Holmes goes to jail
Nearly 10 years after startup Theranos promised to disrupt the health care industry and achieved a valuation of about $10 billion, more than five years after the company was dissolved following revelations that it was all smoke and mirrors and a year after a brutal four-month in the trial, Elizabeth Holmes is, after all, actually in prison.
It seemed that at some point everyone in the world was rooting for Holmes. She was on the cover of every magazine and spoke on every stage — including ours, let’s be honest. But once the lies caught up with her, the scale of her fraud overwhelmed even her staunchest supporters. It seems unlikely that any of her “Holmies” will remain when she finishes her 11-year sentence. — Devin Coldewey.
How a phone call with bankers led to the downfall of startup Ozy Media
The it started with a phone call which pierced the ears of the bankers in the most extraordinary manner. On a call with Goldman Sachs investors preparing to close a $40 million deal to fund media startup Ozy Media, one of its executives made a disastrous mistake that would months later tear the company apart. A strange voice on the conference call purported to be a YouTube executive heaping praise on Ozy. But investors became suspicious and contacted the executive directly, who told them the person on the call must have been an impersonator, since the executive had never spoken to Goldman Sachs investors before. Ozy CEO Carlos Watson apologized to the bankers and blamed the incident on the alleged mental health crisis of an Ozy executive, but the damage was already done.
Samir Rao, who prosecutors accuse of impersonating the YouTube executive’s voice in the now-famous Goldman Sachs call, along with Ozy’s former chief of staff Suzee Han, have pleaded guilty to their roles in the scheme to defraud investors . according to the Ministry of Justice. Prosecutors charged Watson with conspiracy to defraud a month later, to which Watson pleaded not guilty. — Zack Whittaker.
Binance CEO pleads guilty to federal charges
Binance is the world’s largest crypto exchange and has held that title since 180 days after its launch in June 2017. But behind this prestige lay a great deal of deception as the company and its founder, Changpeng Zhao, aka “CZ”, pleaded guilty. in a series of breaches by the Department of Justice and other US agencies.
The stock market and the founder have made headlines over the past year for a number of reasons, including CZ’s comments that contributed to the collapse of FTX (more on that below), as well as his stance on previous US lawsuits against his company, the which he often rejected. as “FUD”, an acronym for “fear, uncertainty and doubt”.
But that all came to a head in late November as both Binance and CZ threw their hands up. And their appeals cost a huge dollar amount. The crypto exchange plans to pay about $4.3 billion to resolve the Justice Department investigation and has reached settlements with other entities as well. CZ must pay a $150 million fine to the Commodity Futures Trading Commission and agreed not to make statements “contrary to his acceptance of responsibility.”
After all this clearing up, CZ now remains in the US and can’t leave due to his “enormous wealth” and lack of ties to the states. the judge ruled earlier this month. CZ’s fate will be decided in late February at his sentencing in federal court in Seattle where he could face up to 18 months in prison. — Jacqueline Melinek.
Allergy testing startup CEO Mark Schena convicted of defrauding the government
Fool us once, shame on you. Fool us twice and… straight to jail. This is the short story of Mark Schena, a former California-based Arrayit Corporation executive who lied to investors about the company’s ability to do allergy and COVID-19 testing and is paying the price. In October, Schena was he was sentenced to eight years in prison and was ordered to pay $24 million in restitution to victims. Schena’s conviction came just months after disgraced Theranos founder Elizabeth Holmes was ordered to prison for a similar fraud, and prosecutors were not taking a second health-related scam lightly.
Like the Theranos case, Schena made bold claims about his company’s testing prowess, but went further by defrauding the federal government after billing Medicare $77 million for fraudulent COVID-19 and allergy tests. according to the Associated Press. The lies didn’t stop there. Schena lied about being shortlisted for the Nobel Prize and claimed Arrayit was worth more than $4 billion when it wasn’t. Prosecutors accused Schena of putting “profit before public safety” by using the COVID-19 pandemic to “fuel a bootleg scheme and a massive fraud on investors and people seeking better health care at a time of great uncertainty.” — Zack Whittaker.
FTX’s SBF Convicted of Massive Crypto Fraud
Once upon a time, Sam Bankman-Fried was considered the savior of the cryptocurrency world, the one who could bring stability and dignity to the web3. Founded in 2019 as an offshoot of his trading firm Alameda Research, FTX’s cryptocurrency exchange soon had billions in capital and “acquired legend status,” according to a now-infamous article by investor Sequoia.
Unfortunately, SBF wasn’t the cure for web3’s shenanigans — it was one of its biggest perpetrators. A report in late 2022 revealed that its balance sheet was overvalued and flawed. the whole operation collapsed and SBF himself was extradited and arrested a month later. He would soon defy common sense by openly confronting his apparently naive but apparently fraudulent financial practices and evidence of appalling misappropriation of funds emerged. Other FTX leaders pleaded guilty. SBF tried and failed to avoid conviction.
He has not yet been sentenced but faces a maximum sentence of 115 years in prison. — Devin Coldewey.
Mike Rothenberg, once a Silicon Valley darling, now a convicted fraudster
Mike Rothenberg burst onto the scene in Silicon Valley about a decade ago as something of a lunatic. A self-described former math Olympian who attended Stanford before earning an MBA from Harvard Business School, Rothenberg was set up for a traditional career in finance or venture capital. Instead, he struck out on his own, founding a small venture fund with big ambitions.
But Rothenberg was too impatient. Instead of steadily growing the company, he embraced a more polished approach, throwing expensive events for the founders for deal flow and marketing benefits, from parties to box seats at Golden State Warriors games. An expensive “annual” event held two years in a row at the stadium where the San Francisco Giants play even inspired an episode of the HBO show “Silicon Valley.”
Alas, it all came crashing down soon after, and after more than five years spent battling the SEC and DOJ, which was after him for overcharging investors for personal projects, Rothenberg was convicted last month on 21 counts, including bank fraud. false statements, four counts of money laundering and 15 counts of wire fraud.
While Rothenberg will not be sentenced until March 1, he could face a mountain of prison time in addition to millions of dollars in fines. Meanwhile, one of the saddest aspects of this story is that Rothenberg’s bets were pretty good. Among his first investments was Robinhood, the brokerage that became a wildly successful investment for his fellow venture capitalists. — Connie Loizo.
Former Uber security chief Joe Sullivan convicted after covering up data breach
Former federal prosecutor turned Uber security chief Joe Sullivan has become the first corporate cyber security officer to be convicted of crimes committed on the job. In March, a federal judge sentenced Sullivan to three years of probation after previously finding the former Uber executive guilty of obstruction of official process and misdemeanor felony counts of failing to report.
Sullivan spoke to TechCrunch months later about his court case and why he had to “get over” the shock of his unexpected conviction and the bitterness he felt. Sullivan, who now runs a nonprofit that helps provide technical and humanitarian aid to Ukraine, said security officials “have to run toward” the job, not away from it. — Zack Whittaker.
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