I estimate that 1-2% of $100M+ YCombinator-backed companies have faced serious allegations of fraud.


  • I’m interested in better understanding the base rates of fraud in high-growth companies. YCombinator is a convenience sample for “high-growth companies”, as they are relatively public about who they back, and act as a filter for e.g. “obviously fraudulent” companies.
  • I was able to find 3 companies which closed due to (alleged) fraud, two more which had their business substantially impacted by fraud claims, and three which had mild business impacts from fraud claims.
  • YCombinator has incubated 3,951 companies, which gives a naïve rate of ~0.1% of companies having major allegations of fraud.
  • I estimate that there are around 400 YCombinator-incubated companies with a valuation over $100M.[1] 3 of the 5 companies with major fraud had $100M+ valuations, implying that 3/400 = 1% of $100M+ companies have major fraud charges. I think that this 1% number is probably more useful than the previous 0.1% number, because I expect that many smaller companies were fraudulent but no one bothered to charge them or report on it.
  • I also wouldn’t be surprised to learn if I missed some cases, though I’d be surprised if I missed more than half of the $100M+ cases.
  • So overall, I estimate that maybe 1-2% of $100M+ YCombinator-backed companies have faced serious charges of fraud.

Additional Comments

  • It’s notable that almost half of the companies on this list are financial services, which I believe makes them overrepresented.
  • I expect that YCombinator is better at filtering out fraudulent companies than other angel investors, but they are also more likely to generate highly valuable companies. I’m not sure how these factors balance out, but would guess that they are roughly equal, implying that 1-2% of all high-growth $100M+ companies face serious fraud charges.


uBiome$298MFatal“the company shut down in 2019 following an investigation into possible insurance fraud… Since 2021, the FBI has considered [the founders] to be fugitives.” (Wikipedia)
LendUp$500MFatal"We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers," said CFPB Director Rohit Chopra. (Reuters)
Stablegains$6-15M[2]FatalInvested customer funds into a cryptocurrency which collapsed. Customers allege this was deceptive, though I can’t find any evidence of them actually being charged (yet). (The Defiant)
Synapsica$8-20M[3]MajorTwo cofounders charged with defrauding the third and other investors. 1/3 of employees were laid off, which the company claims is unrelated to the fraud charges.
Flutterwave$3BMajorAssets frozen over claimed violations of anti-money laundering laws. The company denies misconduct and seems to still be operating at a large scale. I am unfamiliar with the Nigerian legal/financial system, and it’s unclear to me how serious these charges are.
Zenefits$4.5BMajorCEO resigned over accusations of violating licensing laws. Went through several rounds of layoffs; unclear how related to these accusations those are. (Ben Kuhn)
Bikayi$21-50M[4]MildSalespeople forged signatures of customers. It looks to me like the company separately encountered financial trouble and this fraud in particular was maybe just used as a cover to fire people.
Momentus$65MMildSEC settled charges that the CEO misled investors about his immigration status and the results of a test of their technology during an attempt to take the company public. The company has now successfully gone public; my impression is that the CEO was fired but otherwise the company is fine.
Modern Health$1.2BMildOne cofounder sued the other for defrauding investors by not disclosing incentives provided to customers which may have boosted sales. It seems like few media venues have picked up on the story, and so far the impact on their business seems mild.
Dreamworld$1.8M[5]Not actual fraud?“The main accusation is that DreamWorld is a scam: an impossible project helmed by two people who have no idea what they're doing.” (PC Gamer) It looks to me like this is just a bad product, rather than fraud per se.
Thrive Agric$112-282M[6]Not actual fraud?Accused of being a Ponzi scheme after missing payments to investors. It looks like those payments have now been made and I can’t find any outstanding accusations.


I would like to thank Oli Habryka for pointing me to about half of these examples.

Addendum: Founder Fraud

I additionally came across 2 founders of YCombinator-backed companies who were charged with fraud unrelated to their business:

  1. Aaron Swartz
    1. Cofounder of Reddit
    2. Charged with wire fraud for breaking the copyright on academic papers
  2. Ilya Lichtenstein
    1. Charged with hacking bitfinex
    2. Cofounded mixrank
    3. As far as I can tell, there are no charges that mixrank did anything bad
  1. ^

     In this list YCombinator publishes of their most valuable companies, the one closest to the bottom that I can find a public valuation estimate for is Fampay, ranked #311, with a valuation of $150-170M. I think the difference in valuation between companies at the bottom of this list is relatively small, for example Drchrono (#269) was acquired for $180M. Additionally, there are 13 publicly traded YCombinator companies with a market capitalization above $100 million. So I’m going to guess that there are around 400 companies with a $100M+ valuation, but I’m not sure.

  2. ^

     I can’t find information about their valuation, but they raised $3 million at their most recent round and I would expect that this was in exchange for a 20-50% stake

  3. ^

     Using the same 20-50% heuristic as with Stablegains, applied to their $4.2 million series A

  4. ^

     Same heuristic, applied to their $10.8 million series A

  5. ^

     They have not raised outside the initial YCombinator investment, which generally values companies at $1.8 million

  6. ^

     Standard heuristic, applied to their $56.4 million series A


New Comment
3 comments, sorted by Click to highlight new comments since: Today at 9:38 PM

I would be careful to discern between fraud and police state allegations of fraud. Aaron Swartz is clearly the latter and it at least deserves to be mentioned in the article.

I agree that Y Combinator is good at filtering out fraud - and I'd argue that's why they have so many high value companies - which would invalidate your argument that these balance out. Why do you think they're good at filtering and why do you think the effects balance out?

Wonder what the false negative rate is.

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