Fraud is one of the hottest and most troubling topics for business at the moment. With cyber crime on the rise, educating on financial fraud is at the forefront of our efforts in helping growing companies on their path to success. Since not even tech giants like Facebook and Google can escape fraud, we wanted to look at one of the ways it's manifested in startups.
SAN FRANCISCO — Like so many bright, young entrepreneurs these days, Isaac Choi arrived here last year, set up shop and promised employees that he would lead them to the Silicon Valley dream.
That dream is turning out mostly to be a mirage.
Last year, Mr. Choi’s company, WrkRiot, began unraveling in a highly public fashion. Its former head of marketing revealed that the start-up had been mired in internal chaos and had sometimes paid employees in cashier’s checks before delaying payment altogether. She also alleged that Mr. Choi had forged wire transfer documents to make it look as if compensation were on the way. By late Tuesday, WrkRiot had taken itself offline. The veracity of Mr. Choi’s credentials are now also in question.
While WrkRiot is not widely known, the start-up’s collapse has gripped Silicon Valley. Mr. Choi’s situation may be extreme, but the company’s implosion has a familiar ring to many who came west to be the next Mark Zuckerberg — but ended up instead at the next WrkRiot. Silicon Valley is always eager to celebrate its success stories, but the reality is that numerous tiny start-ups that few ever hear about form the tech industry’s dysfunctional underbelly.
“With the exception of the alleged fraud, almost anyone who has worked at a start-up has experienced most everything that went wrong at WrkRiot,” said Semil Shah, a start-up investor based in Menlo Park, Calif. “People don’t realize the word start-up is a broad concept that includes everything from a proven entrepreneur raising $15 million to a guy with money from friends and family.” To an outsider, he said, “they’re both the same.”