Silicon Valley may be a place of great power and wealth, but the smallest thing can bring it down. From phony phone calls with bankers to mountains of lies that spiraled out of control, these one-time Silicon Valley darlings were no match for the law.
Here's a look at the tech executives who were convicted last year in 2023.
Nikola founder Trevor Milton sentenced to four years for securities fraud
Trevor Milton used his outsized personality to market an ambitious idea: revolutionizing freight transportation with fleets of hydrogen-electric semi-trucks through his company Nikola. His seriousness attracted partners and investors, including automaker GM. But it was when Nikola went public through a merger with a special purpose acquisition company that Milton's star (and the company's stock) soared into the stratosphere.
It would be short-lived. Within months of reaching the pinnacle of meme stock status, Milton was accused of fraud and federal investigations were launched. He would soon step down as founder and CEO and his problems did not go away with his departure. Instead, Milton was charged, tried, and found guilty of defrauding investors. Milton was sentenced to four years in prison, although it is doubtful his saga will end here. Milton is expected to appeal.
Theranos founder Elizabeth Holmes goes to prison
Nearly ten years after his startup, Theranos, promised to revolutionize the healthcare industry and achieved a valuation of around $10 billion, more than five years after the company dissolved following revelations that it was all smoke and mirrors. , and a year after a brutal four-month crisis, after all of this, and after the trial, Elizabeth Holmes is finally in prison.
It seemed like at some point everyone was rooting for Holmes. She was on the cover of every magazine and spoke on every stage. But once her lies caught up with her, the scale of her fraud surpassed even her staunchest supporters. It seems unlikely that any of her “Holmies” will remain with her when she finishes her 11-year sentence..
How a phone call with bankers caused the downfall of startup Ozy Media
All it started with a phone call which pricked up the bankers' ears in a most unusual way. On a call with Goldman Sachs investors preparing to close a $40 million deal to fund media startup Ozy Media, one of his executives made a catastrophic mistake that would collapse the company months later. A strange voice on the conference call purported to be a YouTube executive who showered Ozy with praise. But investors became suspicious and contacted the executive directly, who told them that the person on the call must have been an impersonator, since the executive had never spoken to Goldman Sachs investors before. Ozy CEO Carlos Watson apologized to bankers and attributed the incident to an Ozy executive's alleged mental health crisis, but the damage had already been done.
Samir Rao, who prosecutors accuse of faking the YouTube executive's voice on the now-infamous Goldman Sachs call, along with Ozy's former chief of staff Suzee Han, pleaded guilty to their role in the scheme to defraud the investors according to the Department of Justice. Prosecutors indicted Watson on fraud and conspiracy charges a month later, to which Watson pleaded not guilty..
Binance CEO pleads guilty to federal charges
Binance is the world's largest cryptocurrency exchange and has held that title since 180 days after its launch in June 2017. But behind that prestige was a lot of deception when the company and its founder, Changpeng Zhao, also known as "CZ », pleaded guilty to a series of violations presented by the Department of Justice and other US agencies.
The exchange and founder has made headlines this past year for a number of reasons, including CZ's comments that contributed to the collapse of FTX (more on this below), as well as his attitude towards previous lawsuits in the US. against his company, which he often ignored as “FUD,” an acronym for “fear, uncertainty and doubt.”
But all of that came to a head in late November when both Binance and CZ raised their hands. And their pleas are costing considerable dollars. The cryptocurrency exchange plans to pay around $4.3 billion to resolve the Justice Department investigation and has also reached agreements with other agencies. CZ has to pay a fine of $150 million to the Commodity Futures Trading Commission and agreed not to make statements “that contradict his acceptance of responsibility.”
After all this, CZ now remains in the US and cannot leave due to his “enormous wealth” and lack of ties to the states, according to the judge's ruling. CZ's fate will be decided in late February when he is sentenced in federal court in Seattle, where he could face up to 18 months in prison.
Allergy testing startup CEO Mark Schena convicted of defrauding government
If you fool us once, it's your fault. Fool us twice and... straight to prison. That's the brief story of Mark Schena, a former executive at California-based Arrayit Corporation, who lied to investors about the company's ability to perform allergy and COVID-19 testing and is paying the price. In October, Schena was sentenced to eight years in prison and was ordered to pay $24 million in restitution to the victims. Schena's sentencing came just months after disgraced Theranos founder Elizabeth Holmes was sentenced to prison for a similar scam, and prosecutors were not taking a second health-related fraud lightly.
As in the Theranos case, Schena made bold claims about his company's testing capabilities, but went further by defrauding the federal government after billing Medicare $77 million for fraudulent COVID-19 and allergy tests. according to the media. The lies didn't end there. Schena lied about being on a shortlist for the Nobel Prize and claimed that Arrayit was worth more than $4 billion when she was not. Prosecutors accused Schena of putting “profit before public safety” by using the COVID-19 pandemic to “fuel a massive bribery and fraud scheme on investors and people seeking better health care during a time of great uncertainty.” ”.
FTX's SBF convicted of massive crypto fraud
Once upon a time…, Sam Bankman-Fried was seen as the savior of the cryptocurrency world, the one who could bring stability and respectability to web3. His FTX cryptocurrency exchange was founded in 2019 as a complement to his trading company Alameda Research, and soon had billions in capital and had “achieved legendary status,” according to a now infamous article by investor Sequoia.
Unfortunately, SBF was not the cure for web3's antics: it was one of its biggest perpetrators. A report from late 2022 revealed that its balance sheet was overstated and flawed; The entire operation failed and SBF himself was extradited and arrested a month later. He would soon be defying common sense by loquaciously addressing his seemingly naive but obviously fraudulent financial practices, and evidence of appalling misuse of funds emerged. Other FTX leaders pleaded guilty. SBF tried and failed to avoid conviction.
He has not yet been sentenced, but faces a maximum of 115 years in prison..
Mike Rothenberg, once a Silicon Valley darling, now convicted fraudster
Mike Rothenberg burst onto the scene in Silicon Valley about a decade ago as something of a maverick. Rothenberg, who describes himself as a former math Olympian who attended Stanford before earning an MBA from Harvard Business School, was prepared for a traditional career in finance or venture capital. Instead, he struck out on his own and created a small venture fund with big ambitions.
But Rothenberg was too impatient. Instead of steadily growing the company, he took a flashier approach, hosting expensive founder events for deal flow and marketing benefits, from parties to skyboxes at Golden State Warriors games. A big-ticket “annual” event held two years in a row at the stadium where the San Francisco Giants play even inspired an episode of the HBO show “Silicon Valley.”
Unfortunately, everything fell apart soon after, and after spending more than five years fighting the SEC and DOJ, who came after him for overcharging investors for personal projects, Rothenberg was convicted on 21 counts, including bank fraud. . false statements, four counts of money laundering and 15 counts of wire fraud.
While Rothenberg won't be sentenced until March 1, he could face a large period of prison time in addition to millions of dollars in fines. Meanwhile, one of the more tragic angles of this story is that Rothenberg's bets were pretty good. Among his first investments was Robinhood, the stock brokerage company that became a highly successful investment for his other venture capitalists..
Former Uber Chief Security Officer Joe Sullivan Convicted of Data Breach Coverup
Former federal prosecutor turned Uber security chief Joe Sullivan became the first corporate cybersecurity leader to be convicted of crimes committed on the job. In March, a federal judge sentenced Sullivan to three years of probation after finding the former Uber executive guilty of obstruction of an official proceeding and commission of a felony, effectively a crime of failing to report wrongdoing.
Sullivan spoke months later about his court case and why he had to “get over” the shock of his unexpected conviction and the bitterness he felt. Sullivan, who now runs a nonprofit that helps bring technology and humanitarian aid to Ukraine, said security executives “should be running toward” the work, not away from it..
