The Department of Justice (DOJ) stated Thursday that a former chief executive of NS8, a business that prevents cyberfraud, has been sentenced to five years in prison and ordered to forfeit $17.5 million for cheating investors out of more than $100 million.
Adam Rogas, a co-founder of NS8 and its former chief financial officer, admitted guilt in March in the Southern District of New York U.S. District Court to faking clients, income, and assets for the fraud detection software firm. According to the DOJ, the false representations enabled him to mislead investors with the aid of co-founder and CIO David Hansen.
Rogas had authority to a business bank account where money from NS8 customers was put. He gave the finance division the account's monthly statements so it could make NS8's official financial statements. He was also in charge of spreadsheets used to monitor sales and revenue.
NS8 started gathering money in the fall of 2019 and the spring of 2020. In advance, Rogas utilized his access to financial records to change bank statements and exaggerate NS8 income figures by tens of millions of dollars. The finance department was subsequently given the amended statements by him.
At the time, according to the DOJ, Rogas "falsified nearly all of NS8's purported customers on internal tracking spreadsheets."
According to the DOJ, during those months, NS8 issued Series A preferred shares based on the falsified, deceptive representations that increased revenue by $40 million and raised around $123 million from investors.
The DOJ asserts that from January 2019 to February 2020, between 40% and 95% of the assets stated on NS8's balance sheets were "fictitious."
The DOJ said that Rogas got $17.5 million both directly and through another business he controlled after NS8 finished its fundraising and performed a tender offer. With some of the cash, he later purchased luxurious goods and a home in the Dominican Republic, claims the Justice Department.
Rogas sent auditors working for investors the fabricated financial statements.
NS8 rebranded as Cyber Litigation in October 2020 and filed for bankruptcy. The Delaware Bankruptcy Court is still proceeding the case.
According to Bloomberg Law, a judge ordered the new business to pay $38 million in restitution to investors in March.
U.S. District Judge John Cronan described the deception committed by Rogas as "brazen, calculated, and long-running" throughout the sentencing process.
U.S. Attorney Damian Williams claimed that Adam Rogas "took the 'fake-it-till-you-make-it' saying to a criminal extreme." Williams continued, "While claiming to be in the fraud prevention business, Rogas himself faked nearly all of his company’s customers, revenue, and assets."
Hansen previously consented to pay $97,523 to satisfy claims made by the SEC that he attempted to prevent a whistleblower from informing the regulator about the fraud in 2018 and 2019. The whistleblower was eventually fired by Rogas. In July 2019, the whistleblower did successfully alert the SEC.
Cyber Litigation was not available for comment.
By fLEXI tEAM