Deliver a Verdict
Elizabeth Holmes
We have been talking about Theranos and its founder, Elizabeth Holmes, for a long time. This week, the latest chapter of the saga ended, as a jury found Holmes guilty:
After more than 50 hours of deliberations over seven days, the jury of eight men and four women convicted Holmes of three counts of wire fraud and one count of conspiracy to commit wire fraud for lying to investors about devices developed by Theranos, the once high-flying biotech company that she started at the age of 19.
The jury found Holmes guilty of defrauding investors, not guilty of defrauding patients, and couldn’t return a unanimous verdict on four other charges. Holmes could face significant prison time - each of the four charges she was convicted of carries up to a twenty year sentence. So, what happened?
It is easy to be cynical about the conviction, since Holmes was only convicted of defrauding rich people and not patients, some of whom received wrong diagnoses that threw their lives into chaos. The lesson, as is often the case in America, is - it’s (probably) okay to steal, just don’t steal from rich people.
It’s probably also okay - in 2022, at least - to lie about what your company can and can’t do. Look at Adam Neumann - he’s becoming a billionaire slum lord as we speak. Matt Levine posits that, maybe, Holmes was a victim of circumstance:
Back in the 2010s this was all viewed as pretty noteworthy stuff, and it was huge news when Theranos’s technology turned out to be fake.
[…]
Raising hundreds of millions of dollars from gullible investors who don’t do much due diligence is not particularly impressive anymore. If you want to do it by pretending to have a technology, you can (try electric vehicles!), but these days even that is optional.
He’s not wrong! Elsewhere in Bloomberg, the consensus is that Theranos will not be a cautionary tale, because investors don’t really care:
“I don’t think a verdict is going to change the way founders and VCs work in the ecosystem,” said Angela Lee, who teaches venture capital at Columbia Business School and runs 37 Angels, an investment network that focuses on early-stage digital health companies. “It's about supply and demand, and there's a tremendous capital supply with the same number of awesome companies.”
Great, so the Theranos trial didn’t teach Silicon Valley anything, but it did send Holmes to prison, which I guess is something. Lessons aside, the trial has been a major news spectacle for the last few months - one I confess I have been following through the excellent Drop Out podcast.
Two years ago I had the privilege of serving on a jury, and I wrote about it here. I have empathy for the Holmes jury, who sat through three months of testimony, and deliberated for days over a complicated set of charges. Here is an ABC News interview with one of the jurors who, delightfully, was a writer for Tiny Toon Adventures:
"It's tough to convict somebody, especially somebody so likable, with such a positive dream," he added, noting he voted guilty on the three counts on which the jury could not agree. "[We] respected Elizabeth's belief in her technology, in her dream. [We thought], 'She still believes in it, and we still believe she believes in it.'"
They didn’t respect her enough to actually believe her testimony, though:
The jury also found Holmes' seven days of testimony to be largely non credible. The 12 members ranked each witness's testimony one through four, with one being non credible and four being the most credible, Kaatz said.
This gets at the difficulty of a jury trial. The jurors - or at least Kaatz, who voted to find her guilty of most of the charges - thought Holmes was likable, and also a liar. People are complicated!
I’ll let someone else debate the charges against Holmes on the legal merits, but as a former juror I wasn’t surprised by the verdict. Charges like fraud have thresholds that must be met, and if a jury is instructed properly, it can be difficult to determine whether a person like Holmes, the CEO of a large company, intended to defraud a particular blood test patient who received an erroneous HIV result. However you may feel about our justice system, it is not necessarily a bad thing that the burden of proof is high for a crime that could carry a 20 year sentence. It was much easier for the jury to convict Holmes of lying to investors, since the prosecution presented them with recordings and email records of her lying to them.
Is this justice? Will this help any of the people who got incorrect blood test results from Theranos, or the whistleblowers whose lives the company tried to ruin? Will it help anyone? I don’t know, and I don’t think that was the point. The Department of Justice went after Holmes because they had solid evidence of fraud - hello Trevor Milton - and thought they could convict. The only winners in this whole mess may be the people who are writing, podcasting, and making TV shows about it.
I’d say the trial of Sunny Balwani will be more interesting as a result, but honestly this whole thing has been exhausting. I don’t know how true crime enthusiasts do it.
Millenials Buying Homes
We have been talking about millenials for awhile - in fact, since the very first edition of this newsletter. A common thing economists and media pundits like to say is that millenials are “killing” things. Another thing they like to point out is that millenials, as a generation, have less wealth and buying power than prior generations. While this is statistically true, there’s also this:
For years, conventional wisdom held that millennials, born from 1981 to 1996, would become the generation that largely spurned homeownership. Instead, since 2019, when they surpassed the baby boomers to become the largest living adult generation in the U.S., they have reached a housing milestone, accounting for more than half of all home-purchase loan applications last year.
The home market is typically excluded from inflation discussions, because homes are supposed to be assets that go up in value, except when they go down. It turns out when you give people access to more money, they might be able to buy things they previously hadn’t been able to afford:
Millennials who already owned homes traded up for more space. Forbearance on student-loan payments, federal stimulus checks and a booming stock market helped some first-time buyers afford a down payment.
More money is a good thing, but it has fueled a frenzied housing market that has to eventually top out, right?
But most housing analysts don’t expect a wave of sustained home price cuts for quite a while.
The pandemic may have accelerated house buying in a generation that would normally have spread it out over the next few years, which, okay that’s fine.
Mostly, it’s another reminder that economists and forecasters don’t seem to be particularly good at their jobs:
For years, conventional wisdom held that millennials, born from 1981 to 1996, would become the generation that largely spurned homeownership.
[…]
Some real-estate brokers also theorized that millennials preferred to rent and spend money on travel and experiences rather than buy houses.
Also! There are also a bunch of VC-backed startups taking advantage of the housing market, eager to dump money on millenials who are ready to buy:
A host of alternative home-finance startups are targeting aspiring home buyers who are either unable to qualify for traditional mortgages, lack a 20% down payment, or can’t compete with buyers offering cash. The downside is that the companies use new, untested systems, ask some customers to give up tax-deductible interest payments and demand a piece of the potential price appreciation in the home.
If creative financing or subprime shenanigans aren’t your thing, maybe you want to put in an “all cash” offer because in hot markets home offers often devolve into bidding wars. Don’t worry, there’s an app for that too:
So [the Eugenios] turned to Flyhomes Inc., which helps buyers with less cash on hand make all-cash offers. The Seattle-based startup bought a three-bedroom house in San Ramon, Calif., for $1.525 million in May on the Eugenios’ behalf, then sold it to them at the same price a few weeks later when their mortgage closed.
Ah, good. Working with a startup that’ll buy a house in cash and flip it to you a few weeks later seems like a great solution. I don’t know. The housing market is certainly hot and shows no signs of cooling off, but it may be thanks in part to investor capital being injected in new and exciting ways. And, maybe, millenials.
Texas
Remember last year when Texas had a bad winter storm and it took down their power grid and some people died? The state was quick to bail out the power companies - at taxpayer expense - but was too busy doing other stuff to winterize its electrical grid. And, well:
Texas’s natural gas industry had almost a year to prepare for last weekend’s cold blast and avoid another loss of production. But yet again, instruments froze, output plunged and companies spewed a miasma of pollutants into the atmosphere in a bid to keep operations stable.
They burned a staggering amount of natural gas to cope with the not-even-extreme weather event. It’s a good reminder that US federalism means one state can spew pollutants into the atmosphere, ignore environmental mandates, and basically fuck the rest of us over because they have access to fossil fuels and are impervious to electoral consequences.
Book Thief
I’ve had this story by Reeves Wiedeman in my tabs for months, unsure whether it was worthy of writing about, because it was just…weird:
…a clever thief adopting multiple aliases, targeting victims around the world, and acting with no clear motive. The manuscripts weren’t being pirated, as far as anyone could tell.
Basically, someone was mass-impersonating hundreds of people in the publishing world, attempting to get their hands on manuscripts before they were published. But, when they were successful they…didn’t do anything with them? For years, it threw the publishing world into chaos, with journalists, and even the FBI getting involved. Accusations were thrown around, proof was hard to come by, and the author of the piece hit multiple dead ends before having to wrap up his investigation.
It’s a good story! And, sure, I sometimes write about scams that don’t involve monetary gain, or make much sense. Whoever was behind the manuscript heists seemed…unhinged. What was the motive? And then, yesterday, the FBI arrested someone:
The mystery may now be solved. On Wednesday, the Federal Bureau of Investigation arrested Filippo Bernardini, a 29-year-old rights coordinator for Simon & Schuster UK, saying that he “impersonated, defrauded, and attempted to defraud, hundreds of individuals” over five or more years, obtaining hundreds of unpublished manuscripts in the process.
I will say, the shenanigans do have chaotic mid-twenties energy. Wiedeman agrees:
In many respects, Bernardini fits the profile that many in publishing were leaning toward: a low-level industry employee allegedly deploying their intimate knowledge of the business to nefarious ends. Bernardini works in foreign rights, the esoteric corner of the publishing world where the thief seemed to do most of their work. English didn’t seem to be the thief’s first language, and it isn’t Bernardini’s, either.
But! But!!
While the indictment said that Bernardini’s behavior continued through July 2021, the scheme did not stop then. Since we published our article in August, I’ve continued to hear from publishing people all over the world who were being impersonated or targeted. The thief even seemed to be deploying new tactics. In December, a Swedish publisher told me that one of their authors had just been contacted by someone they didn’t know on Facebook, claiming to be interested in her upcoming book.
Some in the publishing world suspect the thief wasn’t working alone. Was he part of a global book crime syndicate? Did Bernardini spawn impersonators? Do people in publishing simply live for drama? We’ll have to wait and see if this was truly the final chapter.
Blockbuster
It feels like yesterday we were talking about RadioShack, and I wrote this:
As legacy companies go out of business due to market changes, they may become ripe targets for crypto-adjacent ventures with money to burn, trying to cash in on brand recognition. I can’t wait to buy NFTs at TCBY and spend my SearsCoin to charge my self-driving Saab.
Well, Happy New Year to me:
According to a Twitter thread posted on December 25, BlockbusterDAO seeks to govern the Blockbuster brand and create a decentralized film streaming service out of it — with plans for movie financing and production down the road.
I can’t wait to see what the creative geniuses of web3 come up with, I am sure the “decentralized film production” will be at least as good as Quibi’s.
Lottery Tickets
If you buy a winning lottery ticket using…I don’t know, let’s say someone else’s stolen credit card, you should think through how you’re going to claim your prize:
Two pals from Bolton have been jailed after attempting to claim a £4 million scratch card win.
The two pals had stolen a credit card from another gentleman, and used it to buy lottery tickets and other sundries. When they tried to claim the lottery prize, they aroused suspicion:
Watson, 34, excitedly rang Camelot, before passing the phone to Goodram. An operator asked for his bank details so that the money could be transferred but when the 38-year-old let slip that he did not have an account, it raised suspicions about how the scratch card was bought.
The next day, an investigator from Camelot, called Stephen Long, rang Goodram back and asked about the card used to make the purchase.
Goodram told him that it belonged to a friend named John, who 'owed him money', but could not confirm the man's surname or where he lived.
They even hired a lawyer to help them get the money, but to no avail. But! The fellow whose card was used to buy the lottery ticket didn’t get the money either. That stinks! The judge explained:
Passing sentence, Recorder Sarah Johnston said: "You must have thought all your Christmases had come at once.
She added: "The intended loss was not of Camelot. It wasn't to Mr Addiman. The loss was to the next rightful, law-abiding customer who was to go into that Waitrose store in Clapham and purchase that scratch card.
I mean, yes of course. No one should get any money, because it theoretically belonged to whoever bought that ticket legally. If the thieves had been a bit more clever, they could have worked with Addmian to claim the lottery prize, and pay him back for the couple hundred quid they racked up on his credit card. Everyone would have had a nice Christmas. Alas!
Short Cons
The Denver Channel - “It appeared as if retirement would come early for 52-year-old Denverite Steve Belcher, but the millions he thought he made in November by investing in cryptocurrency turned out to be a lie.”
Bloomberg - “In the days before Christmas, U.S. officials in Boston unveiled insider trading charges against a Russian tech tycoon they had been pursuing for months. They accused Vladislav Klyushin, who’d been extradited from Switzerland on Dec. 18, of illegally making tens of millions of dollars trading on hacked corporate-earnings information.”
NY Times - “Santander UK is trying to recover about $175 million, or about 130 million pounds, that it accidentally paid tens of thousands of people on Christmas Day.”
Defector - “Color Star and Color World still seem extremely fake, but the company’s marketing partnership with the 76ers is now real as hell. The 76ers’ home arena is practically wallpapered with garish banners boasting of Color Star’s listing on the Nasdaq exchange.”
Chainalysis - “Cryptocurrency-based crime hit a new all-time high in 2021, with illicit addresses receiving $14 billion over the course of the year, up from $7.8 billion in 2020. But those numbers don’t tell the full story.”
Tips, thoughts, or advance copies of Trump’s memoir to scammer