How Layoffs Create A Vacuum For Fraud
2 min read

How Layoffs Create A Vacuum For Fraud

Rounds of layoffs bring a new storm on the horizon. This is a story about being cut loose, increasing financial pressure and what happens when people know how to game the system.

You know we are in a downturn because every day there's news breaking about layoffs at some tech company.

The good days are over. Turns out the line doesn't only go up.

But we've been here before. Most people working in tech are young, so you might not remember how the bad times shake out, but some of us remember the last recession, and there's some odd things that happen between the bad news headlines and the big cinema explanation of what went down.

Today I'll tell you an odd story like that - because it will impact all of us.

And that story is about fraud.

By now we're all familiar with fraud. It seems like not a week goes by where we don't see a scam attempt targeting us. Fraudsters are quite literally everywhere and since our contact details are easy to scrape / buy / guess, we've all become targets.

But there's a different kind of fraud that goes largely unnoticed by the public eye. This is logical once you consider that most people are embarrassed about getting scammed. It feels humiliating, and the public is unforgiving, because it's easy to score points by laughing at someone who is deemed dumb.

I'm talking about fraud that affects companies. The real money is not in hacking someone's bank account, but in relieving a big company of their budget.

And of course no company on Earth will be happy to admit that they've been robbed. If you think the public laughing at you is bad, how bad do you think it is to signal to the market that you've been duped?

But it happens all the time. During the boom days, companies are awash with money so they don't really worry about it, but come the squeeze and every dollar counts.

Which is why we're seeing layoffs across the board.

Robbing companies is not easy. You need specialized knowledge in order to pull it off. You need to know where the money is moving out, how the internal reporting is done, how the tracking systems work, etc. You can figure it out from the outside - and that's how most fraudsters targeting companies operate, trying & testing for loopholes and possible vectors of attack.

But the million dollar heist is pulled off by people who were on the inside.

After 2008, a lot of people got laid off in the recession. Many white collar professionals who now had a chip on their shoulder.

That gave rise to what is known as ad fraud - a vast ecosystem of fake websites with fake traffic, estimated to cost about 81 billion USD per year. It's been in making for a decade, largely run by people who are otherwise professional marketers and ad men.

People who just happen to understand how bad the online traffic tracking systems are and how warped the incentives are around spending money on ads.

So when I read the news of another fintech, cybersecurity or crypto company firing hundreds of people, I think about this story.

All those people have a very deep understanding of where and how the money moves in our online industires. They also know how messed up the metrics and the incentives are. They also know where the loopholes are at.

And with venture funding drying up and hiring freezes, many of them will have a tough time on getting new employment. (Many of them are probably also burned out from the years of hypergrowth).

Just connect the dots. Some of them will.

I don't want to make bets on how bad this downturn is going to be. But I'll bet you a keg of beer that we're about to see schemes of fraud that we can't even imagine - and neither individuals or companies are prepared.

Stay tuned.