Former NS8 CEO Adam Rogas Arrested & Charged With Securities Fraud
Adam Rogas, co-founder of cyber fraud prevention startup NS8, who falsified financial statements to defraud investors has been arrested and charged with securities fraud.
The founder and former CEO of cyber fraud prevention startup NS8 Adam Rogas was arrested for securities fraud last week. Rogas, who also served as the CFO of NS8, abruptly resigned almost a week before his arrest by the FBI. However, Rogas, in his response to Forbes maintained that he resigned for family and personal reasons.
Jim Holborown, Vice President of Communications at NS8 told Las Vegas Review-Journal, “As a result, the board of directors has launched an internal investigation . As this is still an active investigation, we are not providing any detail at this point.”
Following his resignation, the company decided to lay off a chunk of its workforce citing financial reasons. “We got on and were told that our finances were not what we thought they were, and there would be layoffs,” said an unnamed employee to Forbes. As a result, the company was downsized, and almost 240 employees were suddenly out of a job.
Las Vegas-based NS8 provides an intelligence-driven platform for fraud detection. The company, launched in 2016, had only recently raised $123 million in Series A financing led by Lightspeed Ventures. In a statement, The Securities and Exchange Commission said Rogas allegedly misled investors by fabricating NS8’s bank statements to show millions of dollars in payments from customers. He presented the manipulated data to investors to falsely claim the company was generating revenue, which was non-existent.
“In the period from January 2019 through February 2020, between at least approximately 40% and 95% of the purported total assets on NS8’s balance sheet were fictitious,” the U.S. Department of Justice said in a press release.
Acting Manhattan U.S. Attorney Audrey Strauss said, “As alleged, Adam Rogas was the proverbial fox guarding the henhouse. While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud.”
In the June Series A round, Rogas apparently cashed in $17.5 million in the total financing proceeds.
The SEC and FBI uncovered the fraud through their investigation, which can result in a prison sentence for up to 20 years. FBI Assistant Director William F. Sweeney Jr. said, “It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself.”
He adds, “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 behavior whenever and wherever we find it.”
NS8 gave the following statement in view of Rogas’ arrest: “At this time, no one else has been charged and the company is cooperating fully with federal investigators. The NS8 Board of Directors has learned that much of the company’s revenue and customer information had been fabricated by Mr. Rogas. These events created significant cash flow issues for the company and required a significant downsizing impacting all of its employees. The remaining NS8 leadership and Board of Directors is working to determine financial options for the company and its stakeholders going forward.”