Did my old job only exist because of fraud?

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Early in my software engineering career, the UK-based startup I worked at, GenieDB, was taken over by a US Venture Capital fund, Frost VP, owned by Stuart Frost. I was functionally the only piece that came to the US. The code was rebuilt, the rest of the team eventually rotated out, even the core strategy was replaced. But I was early in my career and excited to be working in the VC tech-startup world. I ended up making my life in the US, so this was a pretty pivotal phase in my life.

For a while I lived the start-up life: building rapidly and playing Foosball[^1]. GenieDB actively rejected revenue opportunities (a la Silicon Valley) with the aim of getting acquired for pioneering technology. We limped along for years with never more than 3 customers, even when big-tech and eventually open-source did what we tried to do better than us. I left with mixed feelings and eventually came to realize we never had the serious footing it would have taken to actually develop significant technology.

A decade later I heard from a former colleague that Frost was being sued by the SEC for fraud. Still not sure what to make of my time at GenieDB, I was curious enough to skim the complaint, where I saw this line:

Was GenieDB involved in this fraud somehow?

I chewed on this question and it evolved to a form that began to haunt me: Did my old job – the one that brought me to the USA and changed the course of my entire life – only exist because of fraud?

The Alleged Fraud

With this burning question I dove into the record of the case. The alleged fraud was simple: Frost VP operated as an incubator, providing services to the portfolio companies, and the investors say these fees charged were excessive. The case went to binding arbitration[^2] and the investors won, after which the SEC sued to bar Frost from managing funds in the future.

There’s some great elements like:

• Claiming a personal chef and cleaner as expenses
• Telling investors no salary would be paid by the fees (it was)
• Starting a marketing company just to sponsor someone’s visa

But what about GenieDB? Both the arbitration and SEC suit elaborate on this idea of creating companies just to charge them fees:

This allegation was never litigated though, neither court nor arbitrator were kind enough to rule on why GenieDB was in the portfolio.

I had to dive into the evidence and decide for myself. First of all, my old CEO testified that GenieDB was paying excessive fees:

[CEO testimony]

I was only really shaken when I saw what the insiders at the VC fund were saying to each other:

[Internal email]

To me, this email shows that the investments were motivated by the fees[^3] and GenieDB was being used to siphon investor money away. I felt like an ant. My career, my family, my citizenship all would be completely different except for this fraud. This story plays out between investors, multi-millionaire VCs, judges, and my entire life isn’t even a footnote.

Reflection

I took a deep breath. GenieDB did have a concept at the core, which pre-dated Frost turning his eyes on us. A concept which turned out to be quite useful when more serious players took it on. My colleagues and I were really trying to build it, even if the fund manager was eating up our runway with spurious fees for his personal gain. I wasn’t just some instrument of fraud working on nothing.

Besides, turbulence from chance events, lighthearted decisions and even crime alters the course of every life. Stories of chance meetings of a spouse are dime-a-dozen. I just looked in my wake and was surprised by a dark current.

[^1]: Amusingly Foosball ability reflected the corporate hierarchy. Stuart Frost was hands down the best. His second in command a close second, and GenieDB’s CEO could beat any of us programmers.
[^2]: In fact Frost actually initiated the arbitration because he alleged the investors were conspiring against him. The counterclaim laid out the fraud.
[^3]: “With Genie coming out” here is referring to GenieDB dissolving and not paying fees to the incubator any more. GenieDB isn’t one of the companies they are proposing here.