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Anyone who’s been following corporate fraud has been on the edge of their seat in the first half of 2023. After last year’s fraud bonanza we thought we’d seen most everything, but 2023 has had its share of surprises.
Here are some of the biggest fraud stories we’ve been following in the first half of 2023.
Coinbase indictment: The Securities and Exchange Commission (SEC) went after probably the most significant company left in the cryptocurrency space, Coinbase, accusing it in June of “operating as an unregistered securities exchange, broker, and clearing agency.” And that’s after a former Coinbase employee pled guilty in February to two counts of conspiracy to commit wire fraud in what an attorney for the Department of Justice (DOJ) called the “first-ever cryptocurrency insider trading case.”
Binance too: “We are operating as a fking unlicensed securities exchange in the USA bro”: That unforgettable line was allegedly a message from crypto exchange Binance’s chief compliance officer and was included in a criminal complaint filed by the SEC in June. The SEC’s 136-page indictment accuses Binance of “blatant disregard of the federal securities laws and the investor and market protections these laws provide,” and adds, “Defendants have enriched themselves by billions of US dollars while placing investors’ assets at significant risk.”
Elizabeth Holmes saga…ends? Though first investigated by the Wall Street Journal in 2015 and indicted for fraud in 2018, the Theranos founder didn’t go to trial until late 2021. Convicted on four counts of defrauding investors in January 2022, she delayed the onset of her prison sentence through an appeals process, but finally began serving an 11-year sentence at the end of May.
Fuzzy numbers? Charlie Javice, founder of college financial-aid company Frank, convinced JPMorgan Chase to buy her firm for $175 million. While she claimed to be handing over a company with 4+ million college-student customers, the actual number, the complaint filed by prosecutors alleges, was ~300,000. But the chutzpah doesn’t end there: A clause in her deal with JPMorgan required the investment bank to cover her legal fees, and a judge ruled in May that the investment bank did indeed need to cover her defense costs.
The biggest whistleblower award in history: $279 million. More than twice as large as the previous record whistleblower payout, that’s how much the SEC awarded an anonymous whistleblower in May. The payout, according to the Wall Street Journal, stemmed from a bribery case involving Swedish telecommunications company Ericsson.
And that’s just what we know: You might not think it after reading this roundup, but most corporate fraud goes undetected, an academic study reported in January. “The problem is bigger than you perceive it,” a co-author said, adding that “[At] 10% of firms that you’re looking at today, there’s an ongoing fraud.”