Self-Proclaimed Serial Entrepreneur Sentenced to Prison for Ponzi Scheme

person behind bars in prison

Just because someone claims to have past success does not guarantee that they are actually successful.

Incubator Gone Wrong

27-year-old Tanmaya Kabra pitched himself as a successful investor and entrepreneur in several companies. In 2016, Kabra started LaunchByte, a Boston business incubator that allowed other entrepreneurs to grow their companies and seek advice from other successful entrepreneurs in similar industries.

Incubators often provide resources for startups to seek funding from private investors. Kabra used his LaunchByte opportunity to pitch investments with little to no risk, which were well-received by investors looking to put money into companies that were affiliated with his incubator.

However, authorities found that Kabra never funneled the money to the appropriate companies that he pitched. Instead, Kabra used a large chunk of the money to repay previous investors from other ventures. He also used over $200K in stolen funds to buy a power boat, according to the Department of Justice.

Subsequent investigations found that Kabra largely lied about his past success as an entrepreneur and investor. Unfortunately, investors trusted Kabra based on these misrepresentations on his company, his investment pitches, and his entrepreneurial history.

Authorities report that there were over 20 victims who invested over $1.8 million with Kabra. Kabra was sentenced to 21 months in prison and ordered to pay restitution to victims. He was also assessed a $15,000 fine.

Identity Tells All

We have seen countless stories about similar fraudsters who hide or misrepresent their actual history in business. Some fraudsters simply exaggerate or misrepresent their success, while others go as far as to hide their true identities.

In this case, Tanmaya appeared to materially misrepresent his entrepreneurial history to investors. Many investors specifically look to invest in companies that have seasoned founders with multiple success stories and exits under their belts. Thus, some investors are often enamored and blinded by the success of startup founders without actually looking into their backgrounds.

Unfortunately, investors get hurt from this lack of research and due diligence. It is crucial to research those that are affiliated with a particular investment, especially the founders, executives, and other managers of the company.

Beware of Promoters

Similarly, investors should also beware of those pitching the investment.

Many companies have promoters that simply use their sales skills in order to collect a check without actually determining whether the investment is suitable for the investor. There is hardly any concern here for the salesperson, as his/her job is to sell, not to create a beneficial investment opportunity for both parties.

Thus, we urge all investors faced with similar scenarios to conduct proper due diligence on the company, its founders, promoters, and others affiliated with the company. This will provide investors with a solid understanding of the potential trajectory of the company, as well as the inherent risks involved in the investment.

Remember, whatever it is, let’s make sure our money is working for us rather than somebody else.

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