The former CEO of fraud prevention startup NS8 has been charged with fraud for fabricating millions of dollars in revenue to raise $123 million from investors.
The U.S. Department of Justice said Adam Rogas, 43, altered NS8’s bank statements before providing them on a monthly basis to its finance department to show revenue and bank balances that did not exist, resulting in an over $60 million inflation of assets as recently as June 2020.
When NS8 raised approximately $123 million in two offerings, Rogas allegedly provided the false statements to existing and prospective investors, pocketing nearly $17.5 million of the proceeds for himself.
Rogas, who was arrested Thursday on federal charges of securities fraud, is also facing a civil complaint filed by the Securities and Exchange Commission.
“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,” acting Manhattan U.S. Attorney Audrey Strauss said in a news release.
NS8, which Rogas co-founded in 2016, provides fraud detection and prevention software to e-commerce merchants. According to the SEC, Rogas began no later than 2018 to download electronic copies of the firm’s revenue account statements and “altered the text of those statements to grossly exaggerate the dollars paid by customers to NS8.”
“As a result, each of the NS8 financial statements from 2018 to 2020 [was] also false and materially misstated, among other things, the balance of the revenue account, NS8’s revenue, and NS8’s assets,” the commission said.
A doctored balance sheet as of Feb. 29, 2020, showed there was $38.1 million in the revenue account in January and $42.2 million in February when the actual balances were $39,005 and $45,408, respectively, according to the SEC.
Rogas resigned on Sept. 1, the SEC said, after an employee in NS8’s finance department discovered the true balance of funds in the revenue account. More than 200 employees were laid off last week after executives told them the company was under investigation by the SEC for fraud.