CEO of Kubient sentenced for fraud
arstechnica.com167 points by pseudolus 2 months ago
167 points by pseudolus 2 months ago
"CEO of AI ad-tech firm pledging “world free of fraud” sentenced for fraud"
Classic of the genre.
> Revenues for the first quarter of 2020 were shown as $1.38 million, a huge jump from $177,635 in Q1 2019, thanks to "two enterprise customers" that "successfully beta tested KAI."
TL;DR: Their revenue was the result of round-tripping spending through a partner company who agreed to “spend” the same amount of money back into Kubient. They created fake reports to show to auditors to cover up the synthetic revenue.
They generated fake revenue with the help of another company and then IPO-ed months later. Truly a sign of the times in that era of SPACs and other ridiculous market offerings.
This is not unheard of for the fraud-fighters to be fraudsters themselves even after reforming, in which the redemption arc becomes just another scam.
Barry Minkow
Frank Abagnale
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I was thinking it would be ironic and not totally implausible if DOGE pledging to find fraud ends up done for fraud.
He never reformed. He was fraudster , now he got political power and continues as before.
it's always the ones you most expect
For once it's not crypto.
It isn't news that AI is the newest tech grift (and just as power hungry).
Sure, some few legitimate and cool uses. So much if it isn't though, and we're just getting started.
A new candidate for the running for being the Theranos of AI has just been found.
> Paul Roberts is due to serve one year and one day in prison.
What's the point of the extra day? Is there some kind of special procedure for people who get strictly more than a year?
Crimes can be either misdemeanors or felonies in the USA, and they are automatically considered to be the latter if the prison sentence is over a year in length. Therefore he might have been sentenced to the extra day to ensure that his criminal record includes a felony. This would prevent him from getting a job in finance, for instance, even after having served his sentence.
PS. I am not American, let alone an American lawyer, so don't take my word for it!
This is incorrect. In the federal system, while felonies are punishable by imprisonment over a year and misdemeanors by imprisonment up to a year, the important word is punishable - whether the crime is a felony or a misdemeanor is simply inherent to the charge, and if you are convicted, the nature of the crime doesn't change based on the imposed sentence. E.g. if you are convicted of a felony but receive a prison sentence of a year or less, you're still a felon - the charge doesn't just turn into a misdemeanor because you received a shorter sentence.
According to sixty seconds of googling[0], the extra day makes them eligible for sentence reduction for good behavior.
[0]: https://kmlawfirm.com/2022/06/23/whats-the-deal-with-a-year-...
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Edit: for the sake of discussion can we unflag the parent? There are some legit interesting conversations that will be missed due to the parent comment being flagged
I had a nice chat not that long ago with someone who founded a very successful software business and has worked in tech since the 1980s.
They said something that really stuck with. He said that the problem he has seen with today’s entrepreneurs is that in order to get ahead anymore, everyone got comfortable with breaking the rules
At first it was rhetorical, like tearing down old business culture or norms. However at some point that morphed - he said somewhere around 2014 or so he notice a big shift in attitudes from investors in down, in that breaking the rules went from simply the rhetorical to the literal. This was the beginning of what he feels is widespread rule breaking turned into breaking the law, eschewing civil norms in the name of profit and generally the shift from “let’s solve interesting problems and help people” to “let’s make as much money as possible before anyone looks too closely at this” became the norm not the exception.
He feels that in today’s world of business breaking the law to get ahead is now an accepted strategy and as a result it is harder than ever to run an honest business that gets ahead fair and square.
I always think about this conversation when I think about issues related to tech and society
This is pretty much Wall Street finance behavior and when you consider money motivated, highly educated, succeed at all costs, personality types had steered away from finance and into tech over this time period I think it makes a lot of sense. Also, crypto as a whole being lumped into “tech” is massively tempting way to commit fraud. There’s so much room for shenanigans that it draws in con men of all pedigrees.
Do you think leaders should have moral training? And if so, how would such training be provided? Ytcombinator itself maybe deficient in providing moral guidance, but this just one anecdote. What does it say about our mentors and community leaders when they stay out of the moral and simply stay in the technical and business?
Mark Zuckerberg had to turn around and beg forgiveness from the parents of social media users in Congress. This needed to be broadcast globally, and witnessed, because that event shows the full power of the entire history of what this all was, that by the end of it we had to beg forgiveness. I do believe we’ve crossed a threshold and these topics are now in the forefront. The moral question.
I think the failure is indicative with the trend that boils down to this: the more insulated you become to the failure of decisions made by yourself and others like you it’s easier to make bad ones. When you don’t have to deal with the ethics of the actions taken and their consequence what incentive does anyone have to do better?
On the direct question you asked, YC and others should have some form of a course on ethics and ethical decision making and ideally how they teach that should be public for the sake of transparency and scrutiny.
I want to state for the record I also don’t have all the answers to the seemingly exponentially increasing ethical concerns unfolding in 2025.
[-]: for clarity I think ethics is a better defined for what we are talking about in practice
Moral training is useless in the face of the social media flamethrower. It's very easy for people to surround themselves with a feed that tells them that immoral things are Good, Actually. People can reason themselves into anything. The Effective Altruism lot turning into financial crimes with SBF is a good example.
> Do you think leaders should have moral training?
I suspect that they'd then learn even better what to say to make good impressions, while continuing exploiting others and society as much as always nevertheless.
If a person want to rob a bank, would you think moral training would stop him? (Repeating "it's not my money" 10 times)
Well, are we willing to do serious moral training? For example, if you make Elon Musk live with a family that relies on Medicaid, would that be sufficient to convey the experience to such a person? Moral training requires exposure and being uncomfortable. You have to inspire someone to feel the other side, and I agree, just telling them doesn’t appear to work.
It would be interesting if something like that was part of school, say, everyone had to live or work a month with <something> that help them understand how e.g. being dependent on Medicare can be.
Seems tricky to arrange though? Moving in together with a family just because they live on Medicare sounds intrusive
I think ethics is what we are really talking about, not morality policing. If there was ethical enforcement and codification of generally acceptable ethical behavior to go along with it, you’d see changes.
I hold no hope of changing Elon Musk’s morales but making it hard to run directly counter to conducting yourself in an ethical manner would make his morales to a certain degree irrelevant as society / community standards would hold bad actors accountable and in check or face consequences
> make Elon Musk live with a family that relies on Medicaid
Interesting idea, if that changes his stance on empathy?
> for the sake of discussion can we unflag the parent? There are some legit interesting conversations that will be missed due to the parent comment being flagged
Also, the parent comment (while not especially interesting or insightful) isn't breaking the rules or anything. "Flag" is not a mega-disagree button, people.
"Get rich or die tryin" was in the early 2000s ? "Too big to fail" was from the late 80s.
The general feeling, both from the top and the bottom, that breaking the law can either be a calculated risk or counted as cost of business has been prevalent for a while IMHO.
Jerk CEOs constantly reported as getting fined for private infractions and throwing money at the problem as a way of life was only making it more culturally palpable IMHO.
Or even Michael Jordan's Nike deal. We've been there for a while.
Steve Eisman (short holder against cdos) said the following in 2008:
>> We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball... What bothers me ins't that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that? I thought we were better than this, I really did.
He was right and it got even worse, there should have been no bailout. It set a dangerous precedent that is still haunting us, effectively granting those responsible impunity.
Eventually you get caught, things go south. When the hell did we forget all that
Court records are public. People have been charged and arrested, like this story and many others. FTX founder got 25 years. To say fraud is being unpunished is unsupported by the evidence. This was true in the early 2000s when Enron and WorldCom execs were charged and got long sentences.
As bad as fraud is here, it's likely worse compared in other countries when controlling for demographics. I think only China is harder on fraud, in which death penalty is used.
Your examples are the ones that stole the money from the wrong guys. If you just go for the middle or lower class nothing will happen to you. Look at the Sacklers... for a more recent example. Purdue settled for $24 million, admitting no liability, sealing the deposition.
> for a more recent example. Purdue settled for $24 million, admitting no liability, sealing the deposition
I'm not sure that's "the Big One," though. The Sacklers keep trying to make bigger and bigger settlement offers, on the condition they are shielded from civil action, and the settlements keep getting nuked.
You are right I wasn't up to date but it's still peanuts standing against the $35bn [1] in profits from oxy. They basically settled to pay 15 years of interest on it with 0 jail time for executives. These settlements are also always the same they NEVER exceed or even match the fraudulent profits. If I steal $100 from you and I’ll pay $24 back in $2 installments over a year you wouldn’t call it justice you probably would call it fraud.
>> On January 23, 2025, the Sackler family and Purdue settled the lawsuit they faced, in a $7.4bn deal with states and individuals. The Family agreed to pay $6.5bn over 15 years, while Purdue agreed on $900mn in settlements. [2]
[1] https://www.newyorker.com/magazine/2017/10/30/the-family-tha...
[2] https://ft.pressreader.com/1389/20250124/281663965680298
Can't read the stories, but I'd be interested in seeing whether or not the family got the shielding they wanted.
UPDATED
Sorta-kinda:
> The new deal is structured so that the Sacklers are not given automatic protection from liabilities, but victims will need to agree to not pursue further legal action in order to receive a payout, according to the New York attorneygeneral office’s statement.
Looks like they just made it difficult to go after the family, as opposed to impossible. This kind of thing is not unusual.
The trick is that the victims need to get a fairly substantial (to them) payout, to agree to give up their right to sue.
It's likely that lawyers will try to convince people to not accept the payouts. If the settlement isn't generous enough, they may be successful.
In China, fraud runs rampant. A huge punishment for few unlucky individuals does not change much. You would need systematic enforcement, so that chance of being punished is high - and you don't need super huge punishment for that.
Both in USA and Hina, fraud is celebrated and praised on. It is enabled again and again. You see it in Sillicon Valley, you see it in White House and on Wall Street.
Story from an airline pilot who regularly flew to Beijing and visited a mall that was primarily focused on air crews shopping there. Lots of fraudulently unbranded versions of major brands being sold to these crews at extraordinary discount.
Every so often all of the stores would close their store and one would become ‘tribute’. They’d put a table full of whatever product they sold out in front of the closed store and the police would come in, confiscate the limited quantity offered and leave. The stores would reopen a few minutes later and everything would go on as before.
The Chinese government touted these ‘raids’ as evidence they were being tough on infringement.
Hilarious theatre; just like all fraud and enforcement of it, even here in the US. The government targets a few big names who got caught because of their hubris, sends them to jail, and the world continues doing the same thing.
I remember markets--nearly malls--of pirated software in Hong Kong during the 90s. I felt little compunction about shopping there, given how much was difficult to get any other way.
That said, part of the lackadaisical response is because most of the economic victims were foreign companies.
The Chinese police would have acted rather differently if the angry calls for enforcement were coming from Chinese brands and local politicians beholden to those interests.
> For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once.
A statement like this can only come from someone who has never heard of Ea Nasir.
> What bothers me [isn't] that fraud is not nice. Or that fraud is mean.
What bothers me is that fraud stopped being taboo. People started to revel in it, to brag, and--to the detriment of America--promote and vote-for braggarts of fraud.
> When the hell did we forget all that?
It started to become venerated as a sign of power: "Look at me, I blatantly did X and evaded the expected consequences, therefore I must be doing something worth allying with."
A kind of self-reinforcing bubble, like "too big to fail", except "too smart/crooked to get punished".
Kind of makes you think, that all those ancient texts about greed, corruption, temptation, lust, and so on, was all real. Truly real, those things are here at scale and always have been. Just echoing your post, but, some things need to be echoed for eternity.
> For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that?
The problem is that for far too many people fraud and short sighted thinking have been working out great. Really great. Fraud and short sighted thinking have been making people money hand over fist. It's turned people into billionaires. Occasionally one of them gets a slap on the wrist, on extremely rare occasions one of them will end up behind bars, true, but the more money you make the less likely that becomes. Eventually you get people who are literal serial killers but are basically untouchable because even while they commit crimes repeatedly, publicly, admittedly, they are rich enough to be above the law.
The "eventually you get caught" argument no longer holds up.
The "things go south" argument is still true, but things don't go south for the people making a fortune committing crimes. They go south for the rest of us.
The solutions to fraud and corruption haven't changed. It takes transparency and accountability. Until we have those things consistently both corporations and assholes will continue to do whatever makes them the most money regardless of what laws they break or who gets hurt.
I think people have forgotten they massively outnumber the billionaires by a gigantic margin, in large part, because the billionaires have convinced them that one day, if they work hard enough, they too can be billionaires, and they are just temporarily embarrassed billionaires, rather than doomed to always be stuck to the bottom of the billionaire’s shoes.
You can find similar proclamations from people of every era going back as far as people have been writing their thoughts down.
What recent batch? It’s always been like this. It’s documented going back a few thousand years.
Also let’s not attribute any of this to anything other than the will of man. Very very stupid asshole man mostly.
People have this frustrating tendency to see any spike in bad behavior as the worse that it has ever been. I recently saw someone say that anti-Semitism has never been worse and they were getting tons of folks agreeing. I'm sure there's a name for this sort of myopia in psychology.
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Small enough to fail and jail.