Venture Fraud

Isaac Dyck, Freda Fang, Camille Hebert and Ting Xu

No 34868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We assemble the first dataset of venture fraud cases involving 654 U.S. VC-backed startups. Venture fraud has increased over the past two decades. Among newly public firms, VC-backed companies are more likely to face fraud charges than comparable non-VC-backed firms. Governance characteristics, rather than founder traits, are the strongest predictors of fraud: fraud is more prevalent in startups with founder-friendly contracts, complex cap tables, and initial rounds raised in hot market conditions. Fraudulent entrepreneurs continue to found new VC-backed startups unharmed, suggesting weak market discipline. These findings highlight growing agency costs in private markets.

JEL-codes: G24 G3 G38 K22 (search for similar items in EconPapers)
Date: 2026-02
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-law and nep-sbm
Note: CF LE PR
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