In Ironic Twist, Founder of Cyber Fraud Prevention Startup Gets Arrested on Fraud Charges

In Ironic Twist, Founder of Cyber Fraud Prevention Startup Gets Arrested on Fraud Charges
Photo: Chip Somodevilla, Getty Images

That headline sounds like the set-up to a joke, I know, but 2020 has proven time and time again that you can’t make this shit up anymore.

On Thursday, the U.S. Federal Bureau of Investigations arrested Adam Rogas, the founder of the cyber fraud prevention startup NS8, in Las Vegas on multiple charges of securities fraud and wire fraud. Rogas helmed the company until earlier this month, when he abruptly resigned as CEO, according to a Department of Justice press release.

He’s accused of providing investors with doctored bank statements and fake revenue stats to convince them to pour $US123 ($168) million into NS8 during a round of funding in June (of which he allegedly pocketed $US17.5 ($24) million).

“Adam Rogas was the proverbial fox guarding the henhouse,” said acting Manhattan U.S. Attorney Audrey Strauss in the press statement. “While raising over $US100 ($137) million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud.”

It’s a hell of a twist that reads more like a M. Night Shyamalan screenplay than a DOJ release. The absurdity of the situation was not lost on the FBI’s operatives either.

“It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself, but today that’s exactly what we allege Adam Rogas did,” said FBI assistant director William F. Sweeney Jr.

Originally established in 2016, NS8 sells fraud protection software, site monitoring services, and other online safeguards for small businesses. According to a recent Forbes report, NS8 laid off more than 200 employees last week after executives revealed the company was the subject of a federal probe for — you guessed it — fraud. Apparently, Rogas wasn’t just scamming investors; he was pulling one over on his own company too.

In response to the scandal, NS8 said in a press statement that its board has “learned that much of the company’s revenue and customer information had been fabricated by Mr. Rogas” and that it “is cooperating fully with federal investigators.” No one else at NS8 is facing charges at this time, the company continued, and its working with stakeholders to figure out its financial options moving forward.

When asked about his abrupt departure, Rogas previously told Forbes that he left for “family and personal reasons,” but also went on to allege that the top brass at NS8 pressured him with “an SEC investigation that began in November of 2019 to insinuate a more insidious narrative.”

“I did not walk away with the companies [sic] money,” he told the outlet.

Both the U.S. Justice Department and Securities and Exchange Commission filed complaints against Rogas that accuse him of multiple counts of fraud. The DOJ claims that from January 2019 to February 2020, Rogas made up 40% to 95% of NS8’s assets to woo investors, which included providing them with falsified bank statements to reflect $US40 ($55) million in revenue that didn’t exist. The SEC’s complaint further alleges that Rogas presented NS8’s finance department with fabricated bank statements to show millions of dollars in customer payments and gave investors fake financial statements to boot.

The DOJ’s counts of securities fraud and wire fraud alone carry up to a 20-year present sentence each. And just based on the tone of their statement, they seem raring to crack down on this case. Hard.

“Within our complex financial crimes branch, securities fraud cases remain among our top priorities,” Sweeney said. “We’ve seen far too many examples of unscrupulous actors engaging in this type of criminal activity, and we continue to work diligently to weed out this behaviour whenever and wherever we find it.”