The actions which misrepresent the accurate financial performance or financial position of a company or holding is called financial shenanigan. The respective analysis provides the synopsis of the GigaMedia fraud case and the recommendation of how this financial shenanigan could have been detected and avoided.
“GigaMedia Access Corp.” is a holding company that provides computer programming services. It is an email security company based in Virginia. On October 20, 2021, GigaMedia Access Corp., including GigaTrust is charged with financial shenanigan (Former CEO, CFO, And VP Of Email Security Company Charged With $50 Million Fraud Scheme, 2021). The higher executives of the company were accused of $50 million in financial fraud. The founder and the higher executives of the company created fake investors by creating fabricated financial bank statements and audit reports of more than $50 million. Furthermore, one of these duped investors was shown as a purported customer by these higher executives. The founder and higher executives fabricated this scheme to trick different investors into investing millions of dollars in the company. The company’s bankrupt situation came to light when it breached a loan agreement with an investor’s company. The investor took over the company and hired a forensic accounting firm to conduct reconstruction (“GigaMedia Executives Charged With $50 Million Fraud Scheme,” 2021).
According to my perspective, the higher executives and the founder of the company went to great lengths to cover up the financial crisis of the company by making false audit reports, false customer, and false bank statements. This financial shenanigans could have been avoided by one significant step. Even if false bank statements and fake audit reports were generated, the balance sheets cannot be jeopardized. If the investors would have hired a forensic accounting firm/ officer to analyze the balance sheets and cash flows of this email security company, the investors would have detected the fraud scheme.
Former CEO, CFO, And VP Of Email Security Company Charged With $50 Million Fraud Scheme. (2021, October 20). https://www.justice.gov/usao-sdny/pr/former-ceo-cfo-and-vp-email-security-company-charged-50-million-fraud-scheme
GigaMedia Executives Charged With $50 Million Fraud Scheme. (2021, October 20). Bloomberg.Com. https://www.bloomberg.com/news/articles/2021-10-20/cybersecurity-executives-ran-37-million-fraud-scheme-sec-says