A loss in the investors’ and SEC’s suits could force Musk to disgorge any ill-gotten gains from the alleged scheme, estimated at $150 million, as well as potential civil penalties.
The SEC and Musk’s X (formerly Twitter) did not respond to Ars’ request to comment. Investors’ lawyers declined to comment on the ongoing litigation.
SEC purge may slow down probes
Under the Biden administration, the SEC alleged that “Musk’s violation resulted in substantial economic harm to investors selling Twitter common stock.” For the lead plaintiffs in the investors’ suit, the Oklahoma Firefighters Pension and Retirement System, the scheme allegedly robbed retirees of gains used to sustain their quality of life at a particularly vulnerable time.
Musk has continued to argue that his alleged $200 million in savings from the scheme was minimal compared to his $44 billion purchase price. But the alleged gains represent about two-thirds of the $290 million price the billionaire paid to support Trump’s election, which won Musk a senior advisor position in the Trump administration, CNBC reported. So it’s seemingly not an insignificant amount of money in the grand scheme.
Likely bending to Musk’s influence, one of Trump’s earliest moves after taking office, CNBC reported, was reversing a 15-year-old policy allowing the SEC director of enforcement to launch probes like the one Musk is currently battling. It allowed the Tesla probe, for example, to be launched just seven days after Musk’s allegedly problematic tweets, the SEC boasted in a 2020 press release.
Now, after Trump’s rule change, investigations must be approved by a vote of SEC commissioners. That will likely slow down probes that the SEC had previously promised years ago would only speed up over time in order to more swiftly protect investors.
SEC expected to reduce corporate fines
For Musk, the SEC has long been a thorn in his side. At least two top officials (1, 2) cited the Tesla settlement as a career highlight, with the agency seeming especially proud of thinking “creatively about appropriate remedies,” the 2020 press release said. Monitoring Musk’s tweets, the SEC said, blocked “potential harm to investors” and put control over Musk’s tweets into the SEC’s hands.
In May 2024, the website of ad-tech firm Kubient touted that the company was “a perfect blend” of ad veterans and developers, “committed to solving the growing problem of fraud” in digital ads. Like many corporate sites, it also linked old blog posts from its home page, including a May 2022 post on “How to create a world free of fraud: Kubient’s secret sauce.”
These days, Kubient’s website cannot be reached, the team is no more, and CEO Paul Roberts is due to serve one year and one day in prison, having pled guilty Thursday to creating his own small world of fraud. Roberts, according to federal prosecutors, schemed to create $1.3 million in fraudulent revenue statements to bolster Kubient’s initial public offering (IPO) and significantly oversold “KAI,” Kubient’s artificial intelligence tool.
The core of the case is an I-pay-you, you-pay-me gambit that Roberts initiated with an unnamed “Company-1,” according to prosecutors. Kubient and this firm would each bill the other for nearly identical amounts, with Kubient purportedly deploying KAI to find instances of ad fraud in the other company’s ad spend.
Roberts, prosecutors said, “directed Kubient employees to generate fake KAI reports based on made-up metrics and no underlying data at all.” These fake reports helped sell the story to independent auditors and book the synthetic revenue in financial statements, according to Roberts’ indictment.
The curious case of the missing Kickstarter spoons.
An attention-grabbing Kickstarter campaign attempting to reinvent the measuring spoon has turned into a mad, mad, mad, mad world for backers after years of broken promises and thousands of missing spoons.
The mind-boggling design for the measuring spoon first wowed the Internet in 2016 after a video promoting the Kickstarter campaign went viral and spawned widespread media coverage fawning over the unique design.
Known as Polygons, the three-in-one origami measuring spoons have a flat design that can be easily folded into common teaspoon and tablespoon measurements. “Regular spoons are so 3000 BC,” a tagline on the project’s website joked.
For gadget geeks, it’s a neat example of thinking outside of the box, and fans found it appealing to potentially replace a drawer full of spoons with a more futuristic-looking compact tool. Most backers signed up for a single set, paying $8–$12 each, while hundreds wanted up to 25 sets, a handful ordered 50, and just one backer signed up for 100. Delivery was initially promised by 2017, supposedly shipping to anywhere in the world.
But it’s been about nine years since more than 30,000 backers flocked to the Kickstarter campaign—raising more than $1 million and eclipsing Polygons’ $10,000 goal. And not only have more than a third of the backers not received their spoons, but now, after years of updates claiming that the spoons had been shipped, some backers began to wonder if the entire campaign might be a fraud. They could see that Polygons are currently being sold on social media and suspected that the maker might be abusing backers’ funds to chase profits, seemingly without ever seriously intending to fulfill their orders.
One Kickstarter backer, Caskey Hunsader, told Ars that he started doubting if the spoon’s designer—an inventor from India, Rahul Agarwal—was even a real person.
Ars reached out to verify Agarwal’s design background. We confirmed that, yes, Agarwal is a real designer, and, yes, he believes there is a method to the madness when it comes to his Kickstarter campaign, which he said was never intended to be a scam or fraud and is currently shipping spoons to backers. He forecasted that 2025 is likely the year that backers’ wait will finally end.
But as thousands of complaints on the Kickstarter attest, backers have heard that one before. It’s been two years since the last official update was posted, which only promised updates that never came and did not confirm that shipments were back on track. The prior update in 2022 promised that “the time has finally arrived when we begin bulk shipping to everyone!”
Hunsader told Ars that people seem mostly upset because of “bullshit,” which is widely referenced in the comments. And that anger is compounded “by the fact that they are producing, and they are selling this product, so they are operating their business using funds that all these people who were their first backers gave them, and we’re the ones who are not getting the product. I think that’s where the anger comes from.”
“It’s been years now, and [I’ve] watched as you promise good people their products and never deliver,” one commenter wrote. “Wherever you try… to sell [your] products, we will be there reminding them of the empty orders you left here.”
“Where is my item? I am beyond angry,” another fumed.
Those who did receive their spoons often comment on the substantial delays, but reviews are largely positive.
“Holy crap, folks,” a somewhat satisfied backer wrote. “Hell has frozen over. I finally got them (no BS).”
One backer was surprised to get twice as many spoons as expected, referencing an explanation blaming Chinese New Year for one delay and writing, “I can honestly say after 8 years… and an enormous amount of emails, I finally received my pledge. Except… I only ordered 3… and I received 6. I’d be inclined to ship some back to Polygons… bare with me… I’ll return them soon… I appreciate your patience… mebbe after Chinese New Years 2033…”
Agarwal agreed to meet with Ars, show us the spoon, and explain why backers still haven’t gotten their deliveries when the spoon appears widely available to purchase online.
Failing prototypes and unusable cheap knockoffs
As a designer, Agarwal is clearly a perfectionist. He was just a student when he had the idea for Polygons in 2014, winning design awards and garnering interest that encouraged him to find a way to manufacture the spoons. He felt eager to see people using them.
Agarwal told Ars that before he launched the Kickstarter, he had prototypes made in China that were about 85 percent of the quality that he and his collaborators at InventIndia required. Anticipating that the quality would be fully there soon, Agarwal launched the Kickstarter, along with marketing efforts that Agarwal said had to be squashed due to unexpectedly high interest in the spoons.
This is when things started spiraling, as Agarwal had to switch manufacturers five times, with each partner crashing into new walls trying to execute the novel product.
Once the Kickstarter hit a million dollars, though, Agarwal committed to following through on launching the product. Eventually, cheap knockoff versions began appearing online on major retail sites like Walmart and Amazon toward the end of 2024. Because Agarwal has patents and trademarks for his design, he can get the knockoffs taken down, but they proved an important point that Agarwal had learned the hard way: that his design, while appearing simplistic, was incredibly hard to pull off.
Ars handled both a legitimate Polygons spoon and a cheap knockoff. The knockoff was a flimsy, unusable slab of rubber dotted with magnets; the companies aping Agarwal’s idea are seemingly unable to replicate the manufacturing process that Agarwal has spent years perfecting to finally be able to widely ship Polygons today.
On the other hand, Agarwal’s spoon is sturdy, uses food-grade materials, and worked just as well measuring wet and dry ingredients during an Ars test. A silicon hinge connects 19 separate plastic pieces and ensures that magnets neatly snap along indented lines indicating if the measurement is a quarter, half, or whole teaspoon or tablespoon. It took Agarwal two and a half years to finalize the design while working with InventIndia, a leading product development firm in India. Prototyping required making special molds that took a month each to iterate rather than using a 3D-printing shortcut whereby multiple prototypes could be made in a day, which Agarwal said he’d initially anticipated could be possible.
Around the time that the prototyping process concluded, Agarwal noted, COVID hit, and supply chains were disrupted, causing production setbacks. Once production could resume, costs became a factor, as estimates used to set Kickstarter backer awards were based on the early failed Chinese prototype, and the costs of producing a functioning spoon were much higher. Over time, shipping costs also rose.
As Kickstarter funds dwindled, there was no going back, so Agarwal devised a plan to sell the spoons for double the price ($25–$30 a set) by marketing them on social media, explaining this in a note to backers posted on the Polygons site. Those sales would fund ongoing manufacturing, allowing profits to be recycled so that Kickstarter backers could gradually receive shipments dependent on social media sales volumes. Orders from anyone who paid extra for expedited shipping are prioritized.
It’s a math problem at this point, with more funding needed to scale. But Agarwal told Ars that sales on Shopify and TikTok Shop have increased each quarter, most recently selling 30,000 units on TikTok, which allowed Polygons to take out a bigger line of credit to fund more manufacturing. He also brought in a more experienced partner to focus on the business side while he optimizes production.
Agarwal told Ars that he understands trust has been broken with many Kickstarter backers, considering that totally fair. While about 38 percent of backers’ orders still need filling, he predicts that all backers could get their orders within the next six to eight months as Polygons becomes better resourced, but that still depends on social media sales.
Agarwal met Ars after attending a housewares show in Chicago, where he shopped the spoons with retailers who may also help scale the product in the coming years. He anticipates that as the business scales, the cost of the spoons will come back down. And he may even be able to move onto executing other product designs that have been on the backburner as he attempts to work his way out of the Kickstarter corner he backed himself into while obsessing over his first design.
Kickstarter problem goes beyond Polygons
Hunsader told Ars there’s a big difference “in a lie versus bad management,” suggesting that as a business owner who has managed Kickstarter campaigns, he thinks more transparency likely could’ve spared Polygons a lot of angry comments.
“I am not sitting here with a dart board with [Agarwal’s] face on it, being like, when am I going to get my damn spoons?” Hunsader joked. But the campaign’s Kickstarter messaging left many backers feeling like Polygons took backers’ money and ran, Hunsader said.
Unlike people who saw the spoons going viral on social media, Hunsader discovered Polygons just by scrolling on Kickstarter. As a fan of geeky gadgets, he used to regularly support campaigns, but his experience supporting Polygons and monitoring other cases of problematic Kickstarters have made him more hesitant to use the platform without more safeguards for backers.
“It’s not specifically a Polygons problem,” Hunsader told Ars. “The whole Kickstarter thing needs maybe just more protections in place.”
Kickstarter did not respond to Ars’ request to comment. But Kickstarter’s “accountability” policy makes clear that creators “put their reputation at risk” launching campaigns and are ultimately responsible for following through on backer promises. Kickstarter doesn’t issue refunds or guarantee projects, only providing limited support when backers report “suspicious activity.”
Redditors have flagged “shitty” Kickstarter campaigns since 2012, three years after the site’s founding, and the National Association of Attorneys General—which represents US state attorneys general—suggested in 2019 that disgruntled crowdfunding backers were increasingly turning to consumer protection laws to fight alleged fraud.
In 2015, an independent analysis by the University of Pennsylvania estimated that 9 percent of Kickstarter projects didn’t fulfill their rewards. More recently, it appeared that figure had doubled, as Fortune reported last year that an internal Kickstarter estimate put “the amount of revenue that comes from fraudulent projects as high as 18 percent.” A spokesperson disputed that estimate and told Fortune that the platform employs “extensive” measures to detect fraud.
Agarwal told Ars that he thinks it’s uncommon for a campaign to continue fulfilling backer rewards after eight years of setbacks. It would be easier to just shut down and walk away, and Kickstarter likely would not have penalized him for it. While the Kickstarter campaign allowed him to reach his dream of seeing people using his novel measuring spoon in the real world, it’s been bittersweet that the campaign has dragged out so long and kept the spoons out of the hands of his earliest supporters, he told Ars.
Hunsader told Ars that he hopes the Polygons story serves as a “cautionary tale” for both backers and creators who bite off more than they can chew when launching a Kickstarter campaign. He knows that designers like Agarwal can take a reputational hit.
“I don’t want to make somebody who has big dreams not want to dream, but you also, when you’re dealing with things like manufacturing technology, have to be realistic about what is and is not accomplishable,” Hunsader said.
Polygons collaborators at InventIndia told Ars that Agarwal is “dedicated and hard-working,” describing him as “someone deeply committed to delivering a product that meets the highest standards” and whose intentions have “always” been to “ship a perfect product.”
Agarwal’s team connected with Hunsader to schedule his Kickstarter reward shipment on Friday. Hunsader told Ars he doesn’t really care if it takes another nine years. It’s just a spoon, and “there are bigger fish to fry.”
“Listen, I can buy that narrative that he was somebody who got totally overwhelmed but handled it in the worst possible way ever,” Hunsader said.
He plans to continue patiently waiting for his spoons.
This story was updated on March 14 to update information on the Polygons Kickstarter campaign.
Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.
To further the alleged scheme, he “often described non-existent revenue, inflated cash balances,” and “otherwise exaggerated customer relationships,” the US Attorney’s Office said, to convince investors to spend millions. As Beckman’s accomplice, Lau allegedly manipulated documents, including documents allegedly stolen from the venture capital firm that employed her while supposedly hiding her work for GameOn.
The scheme apparently also included forging audits and bank statements, as well as using “the names of at least seven real people—including fake emails and signatures—without their permission to distribute false and fraudulent GameOn financial and business information and documents with the intent to defraud GameOn and its investors,” the US Attorney’s Office said.
At perhaps the furthest extreme, Lau allegedly falsified account statements, including once faking a balance of over $13 million when that account only had $25 in it. The FBI found that GameOn’s revenues never exceeded $1 million in any year, while Beckman allegedly inflated sales to investors, including claiming that sales in one quarter in 2023 got as high as $72 million.
Beckman and Lau allegedly went to great lengths to hide the scheme while diverting investor funds to their personal accounts. While GameOn employees allegedly sometimes went without paychecks, Beckman and Lau allegedly stole funds to buy expensive San Francisco real estate and pay for their wedding in 2023. If convicted, they may be forced to forfeit a $4.2 million house, a Tesla Model X, and other real estate and property purchased with their allegedly ill-gotten gains, the indictment said.
It took about five years for the cracks to begin to show in Beckman’s scheme. Beginning in 2023, Beckman increasingly started facing “questions about specific customers and specific revenue from those customers,” the indictment said. By February 2024, Beckman at last “acknowledged to at least one GameOn consultant” that a flagged audit report “did not contain accurate financial information,” but allegedly, he “attempted to shift blame to others for the inaccuracies.”
Matthew Decker is the former chief information officer for Penn State University’s Applied Research Laboratory. As of October, he’s also $250,000 richer.
In his Penn State position, Decker was well placed to see that the university was not implementing all of the cybersecurity controls that were required by its various contracts with NASA and the Department of Defense (DoD). It did not, for instance, use an external cloud services provider that met the DoD’s security guidelines, and it fudged some of the self-submitted “scores” it made to the government about Penn State’s IT security.
So Decker sued the school under the False Claims Act, which lets private individuals bring cases against organizations on behalf of the government if they come across evidence of wrongdoing related to government contracts. In many of these cases, the government later “intervenes” to assist with the case (as it did here), but whether it does so or not, whistleblowers stand to collect a percentage of any fines if they win.
This now happens in IT with some regularity. In November, Dell, Dell Federal Systems, and Iron Bow Technologies settled with the government for $4.3 million over claims that they “violated the False Claims Act by submitting and causing the submission of non-competitive bids to the Army and thereby overcharging the Army under the Army Desktop and Mobile Computing 3 (ADMC-3) contract.”
But once again, this wasn’t something the government uncovered on its own; a whistleblower named Brent Lillard, who was an executive at another company in the industry, brought the initial complaint. For his work, Lillard just made $345,000.
In early December, Gen Digital (formerly Symantec) paid a much larger fee—$55.1 million—after losing a trial in 2022. Gen Digital/Symantec was found liable for charging the government higher prices than it charged to companies.
Once again, the issue was brought to light by a whistleblower, Lori Morsell, who oversaw the contract for Gen Digital/Symantec. Morsell’s award has not yet been determined by the court, but given the amount of the payout, it should be substantial.
False Claims Act goes digital
Due to the complexity of investigating—or even finding out about—technical failures and False Claims Act cases from the outside of an organization, the government has increasingly relied on whistleblowers to kick-start these sorts of IT cases.
“Had Intel disclosed the defect, including through advertising, press releases, the Product packaging, or the initial setup process, Plaintiff and class members would not have purchased a Product, or would have paid substantially less for it,” Vanvalkenburgh’s complaint said.
According to Tom’s Hardware, “Intel’s 13th Generation Raptor Lake processors have a return rate four times higher than that of the previous generation,” and “14th Generation Raptor Lake Refresh chips also have return rates thrice as high as the 12th Generation Alder Lake processors.” But instead of alerting the public to the defects, Vanvalkenburgh’s complaint alleged, Intel continued touting the processors as providing the ultimate desktop experience for serious gamers and people with “the most demanding of multitasking workloads” seeking speed, efficiency, and reliability.
Vanvalkenburgh alleged that Intel misled customers because Intel wanted to protect its brand and seek unjust enrichment. According to his complaint, Intel knows “consumers are willing to pay more for a reliable processor that runs stably, without failing or crashing frequently.” By failing to alert customers to known defects, Intel’s alleged deceptions increased demand for its CPUs, spiking sales into the millions, while its customers paid hundreds for processors and allegedly “sustained an economic injury.”
“Reasonable consumers do not expect that the Products will crash and fail at high rates, or that running the Products will damage the Products themselves,” Vanvalkenburgh’s complaint said, noting that a patch Intel later provided failed to fix the issue.
Vanvalkenburgh is hoping a jury will agree that Intel deceived customers and order an injunction preventing any future misconduct like misleading advertising or failure to disclose defective products.
If the class action is certified, Intel could owe extensive damages, potentially paying hundreds of millions in a loss. Because Vanvalkenburgh alleged that “Intel’s fraudulent concealment was malicious, oppressive, deliberate, intended to defraud” him, he’s seeking “an assessment of punitive damages in an amount sufficient to deter such conduct.” That’s on top of requests for maximum statutory damages for allegedly unfair and deceptive practices and disgorgement for alleged unjust enrichment.
Multiple clients and employees told investigators that Fadanelli also said she is a registered nurse, which is false. Though she is a registered aesthetician, aestheticians are not permitted to administer injections or prescription drugs.
Investigators set up an undercover operation where an agent went in for a consultation, and Fadanelli provided a quote for a $450 Botox treatment. Investigators also obtained videos and images of Fadanelli performing injections. And the evidence points to those injections being counterfeit, prosecutors allege. Sales records from the spa indicate that Fadanelli performed 1,631 “Botox” injections, 95 “Sculptra” injections, and 990 injections of unspecified “filler,” all totaling over $933,000. But sales records from the manufacturers of the brand name drugs failed to turn up any record of Fadanelli or anyone else from her spa ever purchasing legitimate versions of the drugs.
Despite the mounting evidence against her, Fadanelli reportedly stuck to her story, denying that she ever told anyone she was a nurse and denying ever administering any injections. “When agents asked Fadanelli if she would like to retract or modify that claim if she knew there was evidence showing that she was in fact administering such products, she reiterated that she does not administer injections.”
Ars has reached to Fadanelli’s spa for comment and will update this story if we get a response. According to the affidavit, clients who received the allegedly bogus injections complained of bumps, tingling, and poor appearances, but no infections or other adverse health outcomes.
In a press release announcing her arrest, Acting United States Attorney for Massachusetts Joshua Levy said: “For years, Ms. Fadanelli allegedly put unsuspecting patients at risk by representing herself to be a nurse and then administering thousands of illegal, counterfeit injections. … The type of deception alleged here is illegal, reckless, and potentially life-threatening.”
For a charge of illegal importation, Fadanelli faces up to 20 years in prison and a $250,000 fine. For each of two charges of knowingly selling or dispensing a counterfeit drug or counterfeit device, she faces up to 10 years in prison and a fine of $250,000.
Real bands struggle to remove fake albums from their Spotify pages.
Psych rock band Gong found out about a fake album on their Spotify page while on tour. Credit: via Gong
This fall, thousands of fake albums were added to Spotify, with some appearing on real artist pages, where they’re positioned to lure unsuspecting listeners into streaming by posing as new releases from favorite bands.
An Ars reader flagged the issue after finding a fake album on the Spotify page of an UK psych rock band called Gong. The Gong fan knew that the band had begun touring again after a surprise new release last year, but the “latest release” listed by Spotify wasn’t that album. Instead, at the top of Gong’s page was a fake self-titled album supposedly released in 2024.
The real fan detected the fake instantly, and not just because the generic electronic music sounded nothing like Gong’s experimental sounds. The album’s cover also gave the scheme away, using a generic font and neon stock image that invoked none of the trippy imagery that characterized Gong’s typical album covers.
Ars confirmed with Gong member Dave Sturt that the self-titled item was an obvious fake on Monday. At that time, Sturt said the band was working to get the junk album removed from its page, but as of Tuesday morning, that album remained online, along with hundreds of other albums uploaded by a fake label that former Spotify data “alchemist” Glenn McDonald flagged in a social media post that Spotify seemingly ignored.
Hey @Spotify, you got thousands of junk albums with real artist names from “Ancient Lake Records”, “Beat Street Music” and “Gupta Music” today.
On his site, McDonald gathered the junk album data by label, noting that Beat Street Music, which has no web presence but released the fake Gong album, uploaded 240 junk albums on Friday alone. Similarly, Ancient Lake Records uploaded 471 albums on Friday. And Gupta Music added 483 just a few days prior, along with 600 junk albums from Future Jazz Records uploaded between September 30 and October 8.
These junk albums don’t appear to be specifically targeting popular artists, McDonald told Ars. Rather, generic music is uploaded under a wide range of one-word artist names. However, by using that tactic, some of these fake albums appeared on real artist pages, such as Gong, experimental rock band Swans, and English rock bands Asia and Yes. And that oversight is on Spotify, McDonald suggested.
“Given the scale of output and the randomness of the names, my guess is that the owners of this stuff might not even have intended it to end up on existing artist profiles,” McDonald told Ars. “If they just submitted stuff with artist names, not IDs, then it’s the streaming service’s problem to match those names to profiles, and thus the streaming service’s fault for not figuring out that these are not by the real Yes, Asia, Gong, Swans, etc.”
McDonald told Ars that “the labels should have been a pretty obvious clue in this case” that the album uploads weren’t genuine releases.
“If I still worked there, I would also have immediately scoured the input databases for more releases with the same patterns,” McDonald told Ars. “The stuff I found from those few labels might be only a tiny fraction of the crap.”
A spokesperson told Ars that Spotify is investigating the junk albums that McDonald flagged. It may take time for all albums to be removed from artists’ pages.
“We are aware of the issue, have relocated the content in question, and are considering our further options against the providing licensor,” Spotify’s spokesperson said. “When we identify or are alerted to attempts by bad actors to game the system, we take action that may include removing stream counts and withholding royalties. Spotify invests heavily in automated and manual reviews to prevent, detect, and mitigate the impact of bad actors attempting to collect unearned royalties.”
Spotify seems to turn blind eye to fake albums
McDonald helped Spotify crunch streaming data for a decade before leaving the company in March. He documented his experience in his 2024 book You Have Not Yet Heard Your Favourite Song, which discusses how Spotify deals with streaming fraud.
According to McDonald, “streaming music fraud is not, to be brutally honest, the most glamorous or profitable form of villainy” because “streaming rewards accumulate in tiny micro-transactions.” The only way to get rich is to scale the shady streaming by becoming a business—it seems possible due to similarities in thousands of fake album designs that all the labels McDonald flagged could be under one licensor—but even then, “the larger the scale, the easier it is to detect,” McDonald suggested.
“Abuse at any productive scale almost always ends up revealing itself to somebody,” McDonald wrote, noting that “if the money can find you, so can consequences.”
McDonald told Ars that when he worked at Spotify, he “maintained some dashboards to watch for this sort of thing before the releases went live.” But with so much fraud seemingly going undetected now, McDonald guesses that maybe Spotify “didn’t keep those tools running” after he left.
In his book, McDonald noted that this kind of fraud impacting real artists is often detected by fans, like the Gong fan who reached out to Ars. On Reddit, a fan of dubstep artist Cyclops and soul band Maze criticized Spotify for doing nothing about the same batch of fraudulent uploads that McDonald flagged, despite multiple fan reports.
“If dubious junk shows up on real artist pages, people notice,” McDonald wrote.
In his book, McDonald suggested that the odds of profiting from music streaming fraud have seemingly gotten worse because of authorities cracking down on bad actors and streaming services strengthening fraud prevention teams as generative AI makes streaming music fraud easier than ever.
But even with stronger fraud prevention tools, Spotify seemingly does not immediately respond even when junk albums are flagged directly by artists with tens of thousands of monthly listeners, like Gong. And Spotify also does not seem to bother to trace reported fakes the way McDonald might have to rapidly detect even broader patterns of abuse impacting bands with millions of monthly listeners like Yes or Asia.
Spotify currently seems much quicker to act to detect fake listeners—at times removing music by artists who later prove they committed no fraud, Variety reported in April. To deter that threat, the streaming music service recently started charging “distributors $10 for every track that it has detected accruing significant numbers of artificial streams,” Variety reported. Perhaps eventually, Spotify will crack down just as hard on fake albums.
For now, artists can use a form to report when their music is “mixed up with another artist,” a Spotify support page says.
But there’s no obvious way to flag fake albums on the platform. Sturt told Ars that Gong became aware of the issue on their Spotify page in the middle of a US tour, thanks to “wonderful fans.” He said that Spotify should make it easier for bands to report bogus albums, telling Ars, “it’s hard enough in this industry to get our music heard without Spotify allowing this sort of thing to happen.” As Gong prepares for a new release in 2025, the band recommended that fans consult its site for official information rather than trusting Spotify.
Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.
Enlarge/ Residents line up for COVID-19 testing on November 30, 2020 in Chicago.
The co-owner of a Chicago-based lab has pleaded guilty for his role in a COVID testing scam that raked in millions—which he used to buy stocks, cryptocurrency, and several luxury cars while still squirreling away over $6 million in his personal bank account.
Zishan Alvi, 45, of Inverness, Illinois, co-owned LabElite, which federal prosecutors say billed the federal government for COVID-19 tests that were either never performed or were performed with purposefully inadequate components to render them futile. Customers who sought testing from LabElite—sometimes for clearance to travel or have contact with vulnerable people—received either no results or results indicating they were negative for the deadly virus.
The scam, which ran from around February 2021 to about February 2022, made over $83 million total in fraudulent payments from the federal government’s Health Resources and Services Administration (HRSA), which covered the cost of COVID-19 testing for people without insurance during the height of the pandemic. Local media coverage indicated that people who sought testing at LabElite were discouraged from providing health insurance information.
The list included five vehicles: a 2021 Mercedes-Benz, a 2021 Land Rover Range Rover HSE, a 2021 Lamborghini Urus, A 2021 Bentley, and a 2022 Tesla X. There was also about $810,000 in an E*Trade account, approximately $500,000 in a Fidelity Investments account, and $245,814 in a Coinbase account. Last, there was $6,825,089 in Alvi’s personal bank account.
On Monday, the Department of Justice announced a deal in which Alvi pleaded guilty to one count of wire fraud, taking responsibility for $14 million worth of fraudulent HRSA claims. He now faces up to 20 years in prison and will be sentenced on February 7, 2025.
Enlarge/ Caroline Ellison, former chief executive officer of Alameda Research LLC, was sentenced Tuesday for helping Sam Bankman-Fried cover up FTX’s fraudulent misuse of customer funds.
Addressing the judge at sentencing, Ellison started out by explaining “how sorry I am” for concealing FTX’s lies, Bloomberg reported live from the hearing.
“I participated in a criminal conspiracy that ultimately stole billions of dollars from people who entrusted their money with us,” Ellison reportedly said while sniffling. “The human brain is truly bad at understanding big numbers,” she added, and “not a day goes by” that she doesn’t “think about all of the people I hurt.”
Assistant US Attorney Danielle Sassoon followed Ellison, remarking that the government recommended a lighter sentence because it was important for the court to “distinguish between the mastermind and the willing accomplice.” (Bankman-Fried got 25 years.)
US District Judge Lewis Kaplan noted that he is allowed to show Ellison leniency for providing “substantial assistance to the government.” He then confirmed that he always considered the maximum sentence she faced of 110 years to be “absurd,” considering that Ellison had no inconsistencies in her testimony and fully cooperated with the government throughout their FTX probe.
“I’ve seen a lot of cooperators in 30 years,” Kaplan said. “I’ve never seen one quite like Ms. Ellison.”
However, although Ellison was brave to tell the truth about her crimes, Ellison is “by no means free of culpability,” Kaplan said. He called Bankman-Fried her “Kryptonite” because the FTX co-founder so easily exploited such a “very strong person.” Noting that nobody gets a “get out of jail free card,” he sentenced Ellison to two years and required her to forfeit about $11 billion, Bloomberg reported.
The judge said that Ellison “can serve the sentence at a minimum-security facility,” Bloomberg reported.
Ellison was key to SBF’s quick conviction
Ellison could have faced a maximum sentence of 110 years, for misleading customers and investors as the former CEO of the cryptocurrency trading firm linked to the FTX exchange, Alameda Research. But after delivering devastatingly detailed testimony key to exposing Bankman-Fried’s many lies, the probation office had recommended a sentence of time served with three years of supervised release.
Kaplan’s sentence went further, making it likely that other co-conspirators who cooperated with the government probe will also face jail time.
Both Ellison and the US government had requested substantial leniency due to her “critical” cooperation that allowed the US to convict Bankman-Fried in record time for such a complex criminal case.
Partly because Ellison was romantically involved with Bankman-Fried and partly because she “drafted some of the most incriminating documents in the case,” US attorney Damian Williams wrote in a letter to Kaplan, she was considered “crucial to the Government’s successful prosecution of Samuel Bankman-Fried for one of the largest financial frauds in history,” Williams wrote.
Williams explained that Ellison went above and beyond to help the government probe Bankman-Fried’s fraud. Starting about a month after FTX declared bankruptcy, Ellison began cooperating with the US government’s investigation. She met about 20 times with prosecutors, digging through thousands of documents to identify and interpret key evidence that convicted her former boss and boyfriend.
“Parsing Alameda Research’s poor internal records was complicated by vague titles and unlabeled calculations on any documents reflecting misuse of customer funds,” Ellison’s sentencing memo said. Without her three-day testimony at trial, the jury would likely not have understood “Alameda’s intentionally cryptic records,” Williams wrote. Additionally, because Bankman-Fried systematically destroyed evidence, she was one of the few witnesses able to contradict Bankman-Fried’s lies by providing a timeline for how Bankman-Fried’s scheme unfolded—and she was willing to find the receipts to back it all up.
“As Alameda’s nominal CEO and Bankman-Fried’s former girlfriend, Ellison was uniquely positioned to explain not only the what and how of Bankman-Fried’s crimes, but also the why,” Williams wrote. “Ellison’s testimony was critical to indict and convict Bankman-Fried, and to understanding both the timeline of the fraud schemes, and the various layers of wrongdoing.”
Further, where Bankman-Fried tried to claim that he was “well-meaning but hapless” in causing FTX’s collapse, Ellison admitted her guilt before law enforcement ever got involved, then continually “expressed genuine shame and remorse” for the harms she caused, Williams wrote.
A lighter sentence, Ellison’s sentencing memo suggested, “would incentivize people involved in a fraud to do what Caroline did: publicly disclose a fraud, immediately accept responsibility, and cooperate immediately with civil and criminal authorities.”
Williams praised Ellison as exceptionally forthcoming, even alerting the government to criminal activity that they didn’t even know about yet. He also credited her for persevering as a truth-teller “despite harsh media and public scrutiny and Bankman-Fried’s efforts to publicly weaponize her personal writings to discredit and intimidate her.”
“The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” Williams wrote.
In her sentencing memo, Ellison’s lawyers asked for no prison time, insisting that Ellison had been punished enough. Not only will she recover “nothing” from the FTX bankruptcy proceedings that she’s helping to settle, but she also is banned from working in the only industries she’s ever worked in, unlikely to ever repeat her crimes in finance and cryptocurrency sectors. She also is banned from running any public company and “has been rendered effectively unemployable in the near term by the notoriety arising from this case.”
“The reputational harm is not likely to abate any time soon,” Ellison’s sentencing memo said. “These personal, financial, and career consequences constitute substantial forms of punishment that reduce the need for the Court to order her incarceration.”
Kaplan clearly disagreed, ordering her to serve 24 months and forfeit $11 billion.
Enlarge/ An urn with ashes and a numbered cremation stone that is placed in the coffin of the deceased before the cremation.
A Colorado judge has ordered a couple to pay more than $950 million for allegedly giving grieving families urns full of fake ashes and running a bug-infested funeral home facility where 190 improperly stored bodies were found in various states of decay.
The judgment was issued in a civil class-action lawsuit against Jon and Carie Hallford, who owned the Return to Nature Funeral Home in Penrose, Colorado. It is the first high-profile case against the couple to return a ruling.
The bodies and the extent of the couple’s alleged fraud were discovered late last year after area residents reported a putrid stench emanating from the Penrose facility. The discovery sparked a massive investigation that came to include local, state, and federal investigators and responders. The FBI deployed a team of agents trained to respond to mass casualty events, such as airline crashes.
In addition to the class-action suit, the Hallfords face hundreds of state and federal criminal charges over their allegedly fraudulent funeral services. Specifically, the couple faces 286 charges at the state level, including felony charges of abuse of a corpse, theft, money laundering, and forgery, according to the Colorado Springs Gazette.
Further, federal prosecutors also accuse the couple of lying to the US Small Business Administration to obtain nearly $900,000 in COVID relief funds. The false information provided included “misrepresenting the fact that Jon Hallford owed back child support,” the DOJ noted. And the couple allegedly used the ill-gotten business funds to pay for vacations, cosmetic surgery, and jewelry, among other personal expenses, according to unsealed court documents. If convicted on the federal counts, they could both face around seven years in prison.
Last month, the Gazette reported that state authorities offered the Hallfords a plea deal, in which they would plead guilty to 190 counts of abuse of a corpse, Jon would then serve a mandatory sentence of 20 years in prison, and Carie would serve between 15 and 20 years. Affected family members were reportedly upset by the offer, saying they were not informed of the proposed deal ahead of time and did not feel it reflected the egregiousness of the alleged crimes. It’s unclear if the Hallfords have or will take the deal.
As for the nearly $1 billion payout in the class-action case, the judgment is largely symbolic with the expectation that the Hallfords do not have such money.
“I’m never going to get a dime from them, so, I don’t know, it’s a little frustrating,” Crystina Page told the Associated Press. Page paid the Hallfords to cremate her son’s remains in 2019 and received an urn they claimed held his ashes. She carried the urn around the country until his body was discovered in the Penrose location amid the investigation late last year.
On top of the financial disappointment, affected families did not get the opportunity to face the Hallfords in court as they had hoped. Both Hallfords refused to cooperate with the case or show up for hearings.
Jon Hallford is currently in custody pending the outcome of his federal case. Carie Hallford is out on a $100,000 bond.
Just before the Fourth of July holiday, Elon Musk moved to dismiss a lawsuit alleging that he intentionally misled Twitter investors in 2022 by failing to disclose his growing stake in Twitter while tweeting about potentially starting his own social network in the weeks ahead of announcing his plan to buy Twitter.
Allegedly, Musk devised this fraudulent scheme to reduce the Twitter purchase price by $200 million, a proposed class action filed by an Oklahoma Firefighters pension fund on behalf of all Twitter investors allegedly harmed claimed. But in another court filing this week, Musk insisted that “all indications”—including those referenced in the firefighters’ complaint—”point to mistake,” not fraud.
According to Musk, evidence showed that he simply misunderstood the Securities Exchange Act when he delayed filing a Rule 13 disclosure of his nearly 10 percent ownership stake in Twitter in March 2022. Musk argued that he believed he was required to disclose this stake at the end of the year, rather than within 10 days after the month in which he amassed a 5 percent stake. He said that previously he’d only filed Rule 13 disclosures as the owner of a company—not as someone suddenly acquiring 5 percent stake.
Musk claimed that as soon as his understanding of the law was corrected—on April 1, when he’d already missed the deadline by about seven days—he promptly stopped trading and filed the disclosure on the next trading day.
“Such prompt and corrective disclosure—within seven trading days of the purported deadline—is not the stuff of a fraudulent scheme to manipulate the market,” Musk’s court filing said.
As Musk sees it, the firefighters’ suit “makes no sense” because it basically alleged that Musk always intended to disclose the supposedly fraudulent scheme, which in the context of his extraordinary wealth, barely saved him any meaningful amount of money when purchasing Twitter.
The idea that Musk “engaged in intentional securities fraud in order to save $200 million is illogical in light of Musk’s eventual $44 billion purchase of Twitter,” Musk’s court filing said. “It defies logic that Musk would commit fraud to save less than 0.5 percent of Twitter’s total purchase price, and 0.1 percent of his net worth, all while knowing that there would be ‘an inevitable day of reckoning’ when he would disclose the truth—which was always his intent.”
It’s much more likely, Musk argued, that “Musk’s acknowledgement of his tardiness is that he was expressly acknowledging a mistake, not publicly conceding a purportedly days-old fraudulent scheme.”
Arguing that all firefighters showed was “enough to adequately plead a material omission and misstatement”—which he said would not be an actionable claim under the Securities Exchange Act—Musk has asked for the lawsuit to be dismissed with prejudice. At most, Musk is guilty of neglect, his court filing said, not deception. Allegedly Musk never “had any intention of avoiding reporting requirements,” his court filing said.
The firefighters pension fund has until August 12 to defend its claims and keep the suit alive, Musk’s court filing noted. In their complaint, the fighterfighteres had asked the court to award damages covering losses, plus interest, for all Twitter shareholders determined to be “cheated out of the true value of their securities” by Musk’s alleged scheme.
Ars could not immediately reach lawyers for Musk or the firefighters pension fund for comment.
