CEO lies, commits fraud, and yes, the startup craters

WrkRiot CEO Isaac Choi indicted for defrauding his employees. No surprise, startup craters.

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The game of three-card Monte, which Isaac Choi (aka Yi Suk Choi) has been playing on his investors and employees, has finally come to an ignoble end with his indictment on June 8, 2017. The U.S. Department of Justice's (DOJ) announcement blandly notes Choi was arrested and charged with five counts of wire fraud. 

My memory recalled this case as being anything but bland. So, I reached out to the DOJ and asked to review the indictment (from which the DOJ notice derived) to confirm my memory that Choi not only duped his investors (not the first to do this), but he also duped his employees out of their wages (also not the first CEO to do this) and went one step further, in true Tom Sawyer fashion, and had his trusting employees invest in his company WrkRiot. He then used the employees' funds to pay the employees (a bit of Ponzi action to boot). 

Let's dig in. 

Who is Isaac Choi? Choi is a naturalized U.S. citizen originally from South Korea. He founded WrkRiot, hired about 20 staffers and went about trying to raise $15 million. The indictment shows Choi purported to be someone he wasn't to both investors and employees. He lied about his education (New York University) and work background (analyst with JP Morgan in New York). 

In order to entice a head of marketing to relocate and join the firm, he falsely claimed to have access to significant personal wealth and was investing the money. The first person tale of Penny Kim, I Got Scammed By A Silicon Valley Startup, lays out her experience dealing with Choi and others within WrkRiot. Readers of Kim's account, which she crafted in August 2016, will notice marked similarity between the means by which she was defrauded and those which are identified in the DOJ indictment. 

Choi duped his employees, continually, with tales of how his funds were tied up in off-shore investments that would be released soon, yet none of the funds ever appeared. Instead, Choi "induced WrkRiot employees to loan money to or invest in WrkRiot." Amazingly, this ploy used by Choi allowed him to collect "hundreds of thousands of dollars from his own employees through false representations about the company's financial health."

The coup de grâce of Choi's self-inflicted wounds and the acts that eventually found Choi being indicted were the fake wire transfers he sent to his employees. You see, Choi had missed payroll, and when the troops became restless, he obtained their banking information and then copied a Wells Fargo wire transfer example off the web, Photoshopped their individual details into the image and then sent each employee an individualized email assuring them that the money was on the way. A variant on one of life's most famous lies, the "checks in the mail." 

And thus, these five emails found Choi in violation of Title 18, United States Code, Section 1343. And now he has been arrested and indicted.

But what was Choi up to between August 2016, when Ms. Kim called him out in her piece and the indictment? Interestingly, Choi has been working to make himself disappear from the internet. All his social network accounts have been deleted. Crunchbase has a brief entry about WrkRiot and Choi as CEO, complete with photo (one of the few one can find on the internet of Choi). They also include his "distinguished work history" in CEO bio portion. But apart from that, there is very little to find on Choi, the actions of one perhaps planning a return. 

This tale, unfortunately, reinforces the need for all to perform a bit of due diligence before investing time and effort with any entity. While it is no surprise Choi's startup cratered, given he duped individuals out of their money to unknowingly fund their own work, it remains a tragic tale for those who threw their all behind the creation of the WrkRiot product. 

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