San Francisco couple charged with $60 million AI startup fraud

The investment firm's representative met the synthetic intelligence startup's CEO at a bank in San Francisco's Chinatown last June and expected to receive a press release directly from the bank showing how much the startup, chatbot company GameOn, owed on his had accounts.

The investment company had invested $5.7 million in GameOn in 2021. The representative – a board member of Game On – received the statement, which showed a healthy balance of $13.4 million.

But based on allegations in a federal fraud lawsuit against GameOn CEO and co-founder Alexander Beckman and his wife Valerie Lau Beckman, not all the things was because it seemed. At the start the bank balance was $25.93. Ms. Beckman went to the bank, emailed the fake statement to a bank teller and asked the clerk to place it within the envelope so her husband could pick it up, the indictment says.

While a lot of the couple's fraudulent behavior alleged by federal prosecutors took the shape of allegedly fraudulent financial reports and stolen identities, the incident on the bank was an area move that appeared to work – at first – they are saying within the indictment filed Tuesday.

The investor's representative “believed the statement was genuine and shared images of it with other members of GameOn's board,” the indictment says.

That afternoon last June was the culmination of a years-long fraud by the pair that cost investors and the corporate greater than $60 million. The Beckmans used a few of it to purchase homes, luxury cars and jewellery and to pay for personal schools. Mr. Beckman's children were present, the indictment in U.S. District Court in San Francisco said.

The pair were arrested on Thursday, the US Department of Justice said. A lawyer for Mr. Beckman didn’t reply to requests for comment. Ms. Beckman couldn’t be reached.

GameOn, an organization founded in San Francisco in 2014, served customers including American skilled sports teams, leagues and associations, in addition to well-known fashion and retail brands, the indictment says. Its product was an AI chatbot designed to interact with its customers' fans, customers, and consumers. The indictment doesn’t reveal which teams and leagues were customers.

However, the Los Angeles Chargers National Football League team in 2020 announced that it might use GameOn's chatbot. Posts by GameOn on the social media platform X And Partnerships are referenced in company press releases with the New York Yankees Major League Baseball team, the NFL teams Las Vegas Raiders and Jacksonville Jaguars, the Detroit Pistons of the National Basketball Association, the Las Vegas Aces and Chicago Sky of the Women's National Basketball Association, British soccer titan Arsenal and the mixed -Martial Arts Professional Fighters League. GameOn press releases also claimed partnerships with luxury brands Valentino and Armani.

GameOn customers should not accused of any wrongdoing.

The indictment describes an organization always on the point of failure because the Beckmans allegedly solicited and received investments through false financial documents that dramatically overstated the corporate's sales, profits and bank balances.

“GameOn relied on new investor money to operate, depleted its funds, received overdraft notices from banks, defaulted on payments from certain customers, and often found itself on the verge of not having enough money in the bank to operate and make payroll “Create,” the statement says.

The investment firm whose representative went to the bank that day was one in every of 4 such firms – two in San Francisco, two in New York – that were allegedly defrauded by the Beckmans. The other two alleged fraud victims were people from Northern California.

The company – identified within the indictment as “Investor 1” – received an email from Ms. Beckman in April 2021 with a spreadsheet showing $4 million in sales and $1.9 million in profits for it Month showed, but sales for the whole yr never exceeded $1 million, the indictment says. Three days later, the investment firm GameOn transferred $2.5 million, the indictment says.

The following month, Ms. Beckman sent the corporate a spreadsheet from Mr. Beckman showing that GameOn had nearly $9 million at two banks, when in point of fact the corporate had a negative balance at one in every of the banks and $2,350 at the opposite. had dollars. After Ms. Beckman followed up in September with allegedly inflated sales and profit figures, the investment company transferred one other $3.2 million, the indictment says.

Similar transactions followed the identical pattern: GameOn claimed to an investor that it had revenue of $72.4 million and profit of $56.8 million from January to September 2023, while the corporate made less for the whole yr than $1 million in profits, the indictment says.

To spread false information to investors, Beckman created fake email addresses for real GameOn employees: a contractor, a consultant and a part-time chief financial officer, the indictment says. He can be said to have “prepared two GameOn audit reports using the names, signatures and trademarks of reputable accounting firms,” the indictment says.

The couple used $4.2 million in ill-gotten gains to purchase a property in San Francisco – in upscale Presidio Heights, based on court documents – and invested one other $360,000 in investor money in one other home in the town, they are saying within the indictment. Hundreds of 1000’s each went to the private school, a social club where the Beckmans married in November 2023, and greater than $100,000 went to paying personal property taxes, the indictment says.

Tech website VentureBeat reported in July 2024 that Beckman resigned from GameOn earlier this month, days after an investigation by the startup's board revealed that there was only 37 cents in a checking account that ought to have held $11 million.

The Beckmans, who were each granted $1 million bail on Thursday, based on court records, face years in prison if convicted.

Originally published:

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