What Happens When 'Fake It Till You Make It' Goes Too Far: Term Sheet for April 4, 2019

Discussion in 'Wall St. News' started by dealmaker, Apr 5, 2019.

  1. dealmaker

    dealmaker

    What Happens When 'Fake It Till You Make It' Goes Too Far: Term Sheet for April 4, 2019


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    Jumio founder Daniel Mattes.
    Photograph by David Paul Morris — Bloomberg via Getty Images
    By Polina Marinova
    April 4, 2019


    SECOND ACT


    If you read the book Bad Blood or watched the HBO documentary The Inventor, both of which detail the implosion of blood testing company Theranos, you might think that there’s no way ex-CEO Elizabeth Holmes makes a comeback.

    Well, think again.

    My colleague Lucinda wrote a story about a founder who, like Holmes, took the adage “fake it until you make it” a little too far. Daniel Mattes, the founder of mobile payments identification startup Jumio, reached a settlement with the SEC this week. He agreed to pay more than $17 million to settle charges that he defrauded investors — allegedly overstating the company’s revenue by more than ten times in a bid to sell off his own existing shares in the company to individuals as well as funds starting in 2014.

    Jumio had raised approximately $55.4 million from investors including Facebook co-founder Eduardo Saverin, Andreessen Horowitz, and Citi Ventures. Between 2013 and 2014, even as the company faced falling revenues, Mattes allegedly dramatically cooked the books. According to the commission, Mattes stated in reports to investors that Jumio’s gross revenue reached $251 million when the real figure was $17.2 million in those two years. Jumio then stated that net loss for those two periods together was $9.7 million—73% lower than the actual $36 million loss for that period, according to the SEC complaint.

    And even as he sold off a portion of his stake for a roughly $14 million profit 2014, the SEC says, Mattes sought to reassure investors, telling them that there was “lots of great stuff coming up” and “(he himself) would be stupid to sell at this point.” The SEC contends that he lied to the company’s board of directors as well, telling the team that a vice president was seeking to offload the shares—not himself. At the time, the board had previously refused to let Mattes sell any more of his own stake, keen on keeping Mattes fully invested in Jumio’s success as a company. In 2016, Jumio filed for bankruptcy, making the shares Mattes had sold off worthless. Centana Growth Partners acquired what was left of the payments company shortly thereafter.

    As part of the settlement with the SEC, Mattes is no longer allowed to head a publicly listed company in the U.S. But who says he can’t make a comeback elsewhere?

    He has returned to his homeland, Austria, where in late 2015 he founded a startup 42.cx that seeks to commercialize A.I. He is also now a judge on the Austrian version of Shark Tank dubbed “2 Minuten 2 Millionen.”

    http://fortune.com/2019/04/04/term-sheet-thursday-april-4/
     
    MACD likes this.
  2. RedDuke

    RedDuke

    A come back is possible if product was real and "faking" was to inflate profits and etc. Holmes case is different, the product itself was fake, plus Theranos sent wrong blood tests to people. full knowing that Edison machine was not working. I really do not see how she could come back from this.
     
    wrbtrader likes this.
  3. ironchef

    ironchef

    She could start a hedge fund.
     
    kj5159 likes this.