Crime and Punishment 3.0 Flashcards
1
Q
Theranos Article
What was the fraud case surrounding the company Theranos?
People involved, result, problem
A
- According to journalist John Carreyrou
- Elizabeth Holmes was sentences to just over 11 years in prison, and will have an extra 3 years of supervised release
- Judge Edward Davila oversaw the case, and said Holmes would not accept responsibility
- A jury found Holmes guilty of three counts of wire fraud and one count of conspiracy to commit wire fraud
- Holmes led Theranos, a company that promised to be able to run over 240 tests on a single drop of blood
- Turns out the tech did not work and gave patients inaccurate results, and the trial mainly hinged on whether Holmes knew she was giving false information Sunny Balwani, former chief operating officer was also found guilty on 10 accounts of wire fraud and two counts of conspiracy to commit wire fraud
2
Q
Nikola Article
What was the Nikola scandal?
Scandal, problems, basis
A
- Trevor Milton founded the Nikola Motor Company, and the Nikola One Truck was shown as fully functional, and posted a video showing it
- The firm Hindenburg Research published a report claiming that the Nikola One was not fully functional, and the video was showing the truck rolling down a hill that looked flat
- Nikola sent out a press release titled “Nikola Sets the Record Straight on False and Misleading Short Seller Report”
- Nikola now claims that the gearbox, batteries, inverters, power steering and some others were functional but the hydrogen fuel cell or motors for the wheels did not work
- The truck never did fully function, but the video did never state it was under its own propulsion, only that it was “in motion”
- Nikola’s point is that it doesn’t matter since the Nikola Two works, since Bosch and Iveco helped it from funding from the Nikola One hype
- However, it may make some question these products as well
- Will be based on GM’s Ultium battery platform, not using home-grown hydrogen fuel cell technology
- A key selling point is that the company figured out how to cut the cost of hydrogen fuel
3
Q
Trevor Milton Article
What was the Trevor Milton scandal?
Who he was, charges
A
- Founder and former CEO of electric truck company Nikola
- Sentenced to 4 years in prison after being found guilty of misleading investors
- Milton made several bizarre statements during the hearing, like that his resignation from Nikola was not a result of the fraud allegations but because his wife was ill
- And also said he was a quarter Cherokee and was emotional recounting ethnic cleansing against the tribe
- Claimed to make zero-emission big rigs using hydrogen fuel cell technology
- General Motors announced plans to acquire an 11 percent equity stake
- GM backed out of the deal and Nikola halted work on its planned electric ATV and motorboat
4
Q
Vaporware
What is vaporware?
Basic definition and examples
A
- Computer hardware or software whose manufacture gets announced but is either made available late or never produced
- Announced usually during CES, and in time for Christmas
- Coined by a Microsoft engineer, using it on the Xenix operating system, first appearing in print in as Esther Dyson newsletter
- Vaporware can come about because manufacturers don’t want to lose to competitors
- Some examples include Ovation, Apple WALT and VideoPad, Silicon Film EFS-1, Infinium Phantom and Palm Poleo
- Examples of products which were considered vaporware but were then released include 3D, Bluetooth, Windows Vista, Mac OS X and Lockitron
5
Q
Quibi
What is Quibi?
Basics
A
- American short-form streaming platform that generated content for viewing on mobile devices
- Founded in Los Angeles
- Led by Meg Whitman as CEO
- Quibi’s content library was sold to Roku, Inc
- The platform’s concepts and failure inspired widespread mockery
6
Q
Cruise
What was the Life at Sea Cruise?
Basics
A
- Miray announced that Gemini would commence a three-year “live aboard” round-the-world cruise in November, under the brand “Life at Sea Cruises”
- May, following internal disputes about the safety of using Gemini for the extended voyage, 22 members of the Life at Sea team resigned, including its senior management
- Some prospective passengers had sold or rented out their homes in expectation of living on the ship
- Miray initially promised refunds and some coverage of travel expenses for customers, to be paid in three installments starting in December, but by January 2024 most customers had not received any refunds and Miray extended the expected refund timeframe to start in February
- In January, a group of 78 prospective passengers sent a letter to Markenzy Lapointe, the United States attorney for the Southern District of Florida, requesting a criminal investigation of Miray’s handling of Life at Sea
7
Q
LuckIn Coffee
What is LuckIn Coffee?
Basics
A
- Chinese coffee company and coffeehouse chain
- The company operates shops, stores, and kiosks that offer coffee, tea, and food
- Customers need to download an app to order and pay for drinks online
- Luckin is currently headquartered in Xiamen. Luckin Coffee quickly expanded over the years and outnumbered the number of Starbucks stores in China
- It revealed that it had inflated its 2019 sales revenue
- It resulted in the stock price crashing and several executives being fired
- Trading was suspended and the company was delisted from NASDAQ
- The Wall Street Journal had reported that the company has emerged from bankruptcy after completing the restructuring of its financial debt under United States code, and also replaced most of its top management who were held accountable for the earlier fraud
8
Q
Bitconnect
What was Bitconnect?
Basics
A
- Open-source cryptocurrency
- Connected with a high-yield investment program, a type of Ponzi scheme
- Bitconnect was suspected of being a Ponzi scheme because of its multilevel marketing structure and impossibly high payouts
- Bitconnect interest fluctuated greatly with the volatility of Bitcoin, which its value was tied to.
- The Bitconnect Coin was among the world’s top 20 most successful cryptocurrency tokens until its price collapsed after traders began losing confidence
9
Q
FTX
What is FTX?
Basics
A
- Cryptocurrency exchange and crypto hedge fund
- Founded by Sam Bankman-Fried and Gary Wang
- FTX is incorporated in Antigua and Barbuda and headquartered in the Bahamas
- FTX has been in Chapter 11 bankruptcy proceedings in the US court system
- Public concern began with rumors of unethical and fraudulent inter-company transfers of client funds
- The current CEO of FTX is John J. Ray III, who specializes in recovering funds from failed corporations
- Ray stated: “this situation is unprecedented.” and “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
10
Q
Fractal Compression
What is fractal compression?
Basics
A
- Fractal compression is a lossy compression method for digital images, based on fractals
- Best suited for textures and natural images, relying on the fact that parts of an image often resemble other parts of the same image
- Fractal algorithms convert these parts into mathematical data called “fractal codes” which are used to recreate the encoded image
11
Q
Rug Pulls Article
What are rug pulls in crypto?
A
- A type of crypto scam that occurs when a team pumps their project’s token before disappearing with teh funds
- Happen when fraudulent developers create a new crypto token, pump up the price and then pull as much value out of them as possible before abandoning them as their price drops to zero
- Exit scam
- Liquidity stealing, limiting sell orders and dumping are types of rug pulls
- Hard rug pulls are when developers code malicious backdoors into their token, but soft rug pulls are when developers dump their crypto quickly
- Hard rug pulls are illegal, soft pulls are unethical
- Thodex is a prime example of a rug pull, and the Turkish police detained 62 people but did not find the major perpetrator
- To avoid a rug pull, avoid unknown or anonymous developers, though the biggest and original crypto was developed by anonymous Satoshi Nakamoto
- Avoid no liquidity locked, third-party lockers can provide greater peace of mine
- Avoid limits on sell orderes, skyrocketing price movement with limited token holders (use a block explorer), suspiciously high yields (APY in the triple digits) and no external audit, which should be verified by a legit third party
12
Q
Pump-and-Dump
What are crypto pump-and-dump scams?
A
- Bitcoin, ether and dogecoin are all examples of cryptocurrency
- Can involve social media influencers who receive compensation for telling people to buy a certain digital coin
- A group started selling coins based on Squid Game, though it had no ties with the show, and people jumped on the hype train and then got scammed
- Pump-and-dump is a securities scam often involving stocks (like The Wolf of Wall Street portraying the infamous scam by Stratton Oakmont)
- As prices rise, creators dump their assets into the FOMO they’ve generated, resulting in a price crash that leaves buyers with worthless money
- Big companies need someone like Musk to change teh value, but good coders can create their own crypto tokens, also referred to as coins, like the Shiba Inu which is nearly worthless
- FaZe Clan participated in such a scam for a SaveTheChildren token, pushing the coin to their followers, then sellin goff the tokens
- SafeTrade is another example
- There had been 355 crypto pump-and-dump scams over seven months
- For stocks, it is illegal, but not for crypto
- It is important to understand FOMO, do your homework, check if the same person is suddenly hyping a coin, same goes for an influencer
13
Q
Ponzi Scheme Article
What is a Ponzi scheme in crypto?
A
- Many investors lost millions in Australia to unchecked crypto, under names like HyperFund and HyperVerse
- Established by Sam Lee and Zijing Ryan Xu who founded Blockchain Global
- The liquidator reported them to Asic (Australian Securities and Investments Commission)
- According to Chris Berg, there is a problem with the number of scams
- Financial watchdogs from the UK, New Zealand, Canada, Germany and Hungary promoted consumer warnings about schemes by Lee and Xu
- A number of warnings were sent out regarding HyperVerse
- Australia also then issued a warning
- HyperVerse claimed that because it was a membership-based product it did not qualify as an investment product requiring financial regulator oversight
- Pyramid schemes cause clients to lose money
- The laws do not catch people efficiently, and there are not enough checked in place
14
Q
Wire Fraud Article
What is wire fraud in crypto?
What it is and problems
A
- According to the Department of Justice (DOJ), the classification of the crime does not matter
- DOJ has used wire fraud to prosecute the first two rug pulls involving NFTs and to prosecute two digital asset trading cases
- Wire fraud statute expanded the law beyond the mails to include the telephone, and now all forms of telecommunication
- It is adaptable, Judge Jed Rakoff famously quipped that to prosecutors the mail and wire fraud statutes are “our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart- and our true love”
- Cases: U.S. vs Nguyen (first to involve NFTs, false promise of access to a metaverse game), U.S. vs Tuan (Baller Ape NFT, with not even images provided to buyers), U.S. vs Chastain (insider trading case where an employee could purchase NFTs earlier), U.S. vs Wahi (Coinbase employee who gave info to others), Carpenter vs U.S. (first case where defendant was charged with wire fraud for insider trading, the Wall Street Journalist)
- Recent cases involve rug pull cases and insider trading cases
- Next the DOJ will focus on disclosure/misrepresentation cases, larger insider trading cases and market manipulation cases
15
Q
Aircraft Crimes Article
What are crimes related to aircraft?
Basics
A
- Ships and aircraft are part of the territory of the state the nationality of which they posses
- Distinction has to be made: territorial jurisdiction over national territory and all persons and things therein; quasi-territorial jurisdiction over national ships and aircraft and all persons and things thereon; and personal jurisdiction over all other nationals and all persons under a state’s protection
- Failure of states to extend their criminal laws to their aircraft posed a serious problem, especially connected to the location of international flights
- In most countries, general civil law applies
- Piracy is any crime on a private jet against other planes
- Hijacking is teh unlawful seizure of planes
- Problems of liability arising from international carriage of passengers, baggage and cargo by aircraft are dealt with by the widely accepted Warsaw Convention on International Carriage by Air
- Under the Paris Convention, an International Commission for Aerial Navigation (ICAN or CINA) was created
- International Civil Aviation Organization (ICAO) is affiliated to the UN with Montreal headquarters
- One of the most important functions is the preparation and periodical revision of international standards and recommended practices relating to civil aviation, doing much to standardize aeronautical regulations throughout the world
