Wow. Via Valleywag, from Forbes:
Keith Daubenspeck and Dwight Badger set up Advanced Equities Financial in 1999, tech’s heyday. In their first deal they raised $28 million for Pixelon. The video firm went bankrupt 18 months later after chief executive Michael Fenne blew $11 million on a party featuring The Who and the Dixie Chicks.
Pretty bad, heh? But wait, it gets worst:
Fenne was actually David Stanley, a con man wanted in two states for fraud. Pixelon’s insurer paid $2.6 million to settle claims. Daubenspeck and Badger say their lawyers failed to review Stanley’s past and that they were victims of fraud.
No comment, actually, worth noting the title of the Forbes article (not Valleywag’s!) is “Garbage In…” - wow indeed.
Here’s the clincher:
AE puts investors into outfits like VisionTek. In 2002, eight months after AE put $4.5 million of client money into the video graphics firm, it went bust. The bankruptcy trustee sued Daubenspeck and Badger for helping push it into Chapter 7 by launching a rival with three former VisionTek managers. AE, the managers and a supplier paid $3 million to settle the suit.
And now, the gold medal goes to:
AE’s ability to raise money for shaky firms like Agami put it on the VC map. “Up rounds” of financing that increase the paper value of startups enable earlier-stage VCs to present happier reports to limited partners–and to prospective investors–about their unrealized gains.
“This place is a stereotypical bucket shop,” claims a current AE broker who says he’s sticking around only because he hasn’t been paid in full. “The deal flow is a joke. The only reason we get these deals is because we massively overpay.”
Hmm… maybe I should give them a call… not!
Read and weep.
Subscribe: