And the CEO or others saying “oh yeah you can’t see all those customers and growth because they’re in this old legacy system that doesn’t report it” is an insane excuse to buy. Holy shit you mean to tell us that the majority of our most important revenue is coming from a legacy systems that we have zero insight into? And it’s continuing to grow? Why aren’t those people on the new system?
> “customer revenue” account controlled solely by the CEO
I cannot fathom a VP of Finance, let alone an outside accounting firm, that would be OK with this arrangement of accounts.
Edit: To be clear I’m not trying to blame the victims. This is a terrible loss to all the employees who have been pouring so much of their efforts into the company. I just am having a hard time understanding how such a thing could happen. Maybe I’ve just been blessed to work in extremely transparent organizations.
> I cannot fathom a VP of Finance, let alone an outside accounting firm, that would be OK with this arrangement of accounts.
Right? Then again, EY audited everything and gave those fake bank statements the "thumbs up" as part of the last round of funding and due diligence on the part of the investors. Crazy.
https://markets.businessinsider.com/news/stocks/ey-chairman-...
There were real customers and the customer growth was happening, especially in 2020. The problem is that the customer base and growth was nowhere near what Adam Rogas was cooking up on the backend."
This doesn't really answer the question. The article states 40-90% of customers were fictional, as a cloud architect I would have to design based on the number of customers ++ and of course I would setup monitoring and alerting with auto scaling and it would be blatantly obvious that my utilization was not going up and that would turn into an engineering investigation.
Would it leed me to the idea that most of our customers were fake? probably not. They might not even request additional capacity, but as a architect that would lead me to ask questions. For example after an announcement or company meeting where they announce the number of new customers, I would wonder wtf? How is it that we haven't added any more capacity for all these new customers?
I would see some red flags and I would like to think I would be smart enough to start looking for something new but I haven't been in such a situation thankfully.
It's difficult to read about 200 ppl being laid off and the impact on them and thier family all bc of one stupid, greedy person.
Nothing like this ever happened, AFAICT
> I would see some red flags and I would like to think I would be smart enough to start looking for something new but I haven't been in such a situation thankfully.
"Brazen fraud" is not where Occam's Razor leads in this case. "Transparency growing pains" seems much more likely. Specifically - if working for this company I would raise concerns that there aren't KPIs being regularly tracked across all functions. I'm sure it's possible that some of the newly hired senior management was working on this.
SMB, especially the small end of SMB, does not often have contracts. It's more subscription based. That said, there were 2 versions of the software running at NS8. One was the original software that Adam Rogas and a co-founder created early on. That version was rather "opaque" and reported growing customer numbers every month. The newer version of the software was controlled by the product dev team but still reliant on the original software in some key areas. Basically, everything was obfuscated well enough to confuse everyone to the point where answers of, "it's a limitation of the original software" were taken at face value.
- if the customers are fake there is no load on the system. How does engineering not figure that out?
There were real customers and the customer growth was happening, especially in 2020. The problem is that the customer base and growth was nowhere near what Adam Rogas was cooking up on the backend.
- How does no one see an insanely low COGs when paying the cloud services bills, or the lack of allocated resources when looking in the management interfaces?
COGs and other bills were kept relatively high. It's also why the company hired 200+ people, to make the story all the more believable.
- How does no one notice a complete lack of analytics or actions being generated by all the supposed customers?
Again, real numbers were difficult to gather for excuses given repeatedly by Adam Rogas and others charged with providing those numbers. I'm not saying that others were complicit in the scam, but that they were (at least) being fed the same excuses the rest were. Investments were never made to bring visibility to the customer metrics. Was this a red flag? Yes, but then why are investors giving NS8 so much money? It's hindsight 20/20.
- Managing cash flow would be very hard. Finance is going to see all this revenue coming in and want to scale. The VCs are going to want to see money being spent on marketing activities etc. to further the growth. If there’s no corresponding revenue being spent to acquire customers but tons of revenue coming in that’s a giant red flag
Right, so plenty of money was being spent across the board. There were 2 bank accounts according to the DOJ and SEC complaints. The account for "customer revenue" was solely controlled by Adam Rogas. The other account held the investment funds that paid all the bills. Is this super shady? Yep. And it seems there was an NS8 whistleblower who kicked off the initial SEC investigation and then the FBI getting involved as well.