I Got Scammed By A Silicon Valley Startup

Penny Kim
Aug 28, 2016 · 23 min read
The mantra and the irony that will soon follow

Hook, Line & Sinker

It all started in May 2016 when I was searching Angel.co for opportunities in the Bay Area while living in Dallas. I applied for a Marketing Director position with Startup X and soon received an invitation to interview with the CTO. I took the initial phone screen in Los Angeles where I happened to be, and he asked me to fly out the next day to meet in Santa Clara. The responsibility of the less-than-24-hours flight wasn’t addressed, so I asked who would be covering it. When the CTO asked me to book it and told me it would be reimbursed later, I was hesitant and skeptical but followed through with blind faith. There’s no way a startup I found on Angel.co is going to screw me over, I thought. The next day, I was in Startup X’s office meeting the co-founders and small dev team of 8.

“The Credit Karma of LinkedIn”

My first day of work was July 5th. I walked into the office to find 17 employees. Between June and July, the startup hired an additional 9 members, including a young social media manager who had been running marketing efforts free range prior to my arrival. I had notated in my interview keynote that this person was a team member that I would fill as Marketing Director, so it was interesting they decided to hire the person without communicating with me. Even more interesting was the fact that she labeled herself as the “Chief Marketing Officer” of the startup on her social media channels before she even met me. Already there were signs pointing to challenges ahead.

First week on the job

Late Paychecks Begin

I don’t know when or how the money became an issue. Something tells me that Michael and Charlie knew we were running out before I even arrived in July and they played it off for as long as they could while betting on future investors. Michael covered lunch for the team everyday and sometimes dinner too on the late nights and weekends we worked. We had a cramped but decent office space — we were packed sardines at conference tables, but we made it work and told ourselves we would only endure for a little longer. A new office space lease was signed and we’d be moving in by the first week of August. The co-founders had a subscription to SurfAir, a private airline service that mainly Charlie used to go back home in So-Cal each weekend. ADP was handling payroll up until the first week of my employment before Michael fired them (or did they really fire us?) Everything seemed normal for a startup my first two weeks on the job until payday.

The Flood of Lies

Over the course of the next few weeks, tension grew. The H-1B visa employees were getting nervous — they haven’t been paid since June 15th. Apparently this wasn’t the first time paychecks were late. Several employees had to pay late rent fees for June 1 due to another missed payroll. Michael blamed ADP for this one, saying it was the reason for their contractual fallout. Could have this been another scapegoat in disguise? Probably. Between July 21 and Aug 8 we would be told, every day, that our paychecks were coming. The first few days we were told that physical checks were on UPS trucks. They never came. Days after that we were told that the UPS checks were cancelled because they must be lost and Michael would be personally wiring each of us the money. He asked us to write down our bank accounts and routing numbers. Every day, he would “be at the bank” moving assets around, wiring funds and promising delivery dates that never came. It was our bank’s fault if the money wasn’t there so it was our responsibility to dispute the delinquency. In the meantime, we were still expected to work long hours and be on call for Michael. One time he called me at 11pm on a weeknight to talk about his ideas and how much he didn’t agree with Charlie’s ideas. As each day passed with broken promises and as I would discover more truths, I became more anxious, angry, and distrustful.

email sent on Aug 2, 2016

Protect Yourself

The next day after I sent my email I walked into the DLSE office to file a wage claim. I’d never done this before. After researching my options in the previous week, it took me a few days to finally make a decision. This was a special case where I believed I was protecting my rights as an employee considering I left my life in Texas to work for this startup. I never received my sign on bonus which was my relocation assistance, and the co-founders were going through great lengths to be dishonest about our wages. In the state of California the wage claim process is free to current and former workers and is a government protected act. In other words, you don’t have to hire a lawyer and if your company finds out you filed a claim, and they fire you for it, it is considered retaliation and it is illegal. I went back to work with the intentions of completing what I was hired to do.

Fake It Till You Make It at the Expense of Others

Thursday, August 4th was D-Day. This was the day that set the destructive snowball in motion. That afternoon in the office, Michael emailed each employee a personalized PDF receipt of a Wells Fargo wire transfer with the message:

My fake Wells Fargo wire transfer confirmation sent by the CEO
A real Wells Fargo wire transfer confirmation from 2014
This is what fraud looks like.

Anarchy

Again, things moved fast after that. I encouraged other employees to file wage claims. Adam and Darren (both dev team members and friends) turned in their paperwork and thought they could trust Jessica enough to share their exit plans because she had been complaining about the late payments and threatened to “out” the co-founders on social media. Strangely, she ended up changing her mind the next day about filing her own claim and we soon learned why.

Retaliation

After Michael and Charlie received my email on Thursday night they didn’t know what to do with me. Charlie replied and said we could talk Monday. They knew they had to pay me and pay us or they would have a serious issue to deal with. On Friday, we all received a group text from Michael:

Buying time
Take the day off because we haven’t paid you

The Latest

It’s been three weeks since I left the startup. Charlie texted me on August 17th saying he had my paycheck and to come return the work laptop and key to the office. When I showed up he had me sign a pay stub copy that breaks down all the taxes that were taken out of my two paychecks. The numbers add up except for my full sign on bonus and severance according to my contract. I would have to fight Michael for both of those in court. I wonder where the money for this round came from.

Takeaway

There’s this default human condition to trust others and give the benefit of the doubt. Some may question why I took the job in the first place or continued to work for them when there were so many red flags. To those people I say this: there is also a default human condition to not give up. In hindsight, yes I could have probably saved myself the heartache, but in the end I took a risk I thought worth taking. It brought me to Silicon Valley. I met new and wonderful, smart, talented people. It felt great to work my ass off. I had the opportunity to sit across major VC investors and learn the right questions to ask. I’m not as naive with Silicon Valley and startups. I learned how the state of California fiercely protects employees’ rights. I came to appreciate Dallas more and all the things I took for granted like proximity to friends, family, wide open spaces, and a place to call home. I haven’t given up on Silicon Valley or California, and I sure as hell haven’t given up on good people. I hope you never have to experience what I went through, but if you have, please share your story so that others may learn and know that they are not alone when it comes to startup fraud.

Tells us your startup story. Have you gone through something similar? Email us at content[at]startupgrind[dot]com.

Thank you for reading.

Startup Grind

The life, work, and tactics of entrepreneurs around the world. Welcoming submissions on technology trends, product design, growth strategies, and venture investing. Learn more about how you can get involved at startupgrind.com.

Penny Kim

Written by

Penny Kim

Strategy Director, photographer, world travel enthusiast. Eat, think, and travel plenty. www.pennykim.com

Startup Grind

The life, work, and tactics of entrepreneurs around the world. Welcoming submissions on technology trends, product design, growth strategies, and venture investing. Learn more about how you can get involved at startupgrind.com.