FBI Sting and Legal Consequences

Audible subscribers can listen to all our episodes of sccamfluencers ad free right now Join Audible today by downloading the Audible app Sarah, do you ever watch Shark Tank? or perhaps it's Canadian equivalents Dragons Den? Absolutely. I've watched so many episodes of both of them. and I feel like Shark Tank, anytime you're in a hotel, it's on. Anytime you're in a hotel, an episode of Shark Tank is playing, and I love it Yeah, Shark Tank is a show exclusively made for hotels I watched a lot of Dragonsteone when I was younger and it felt really good to pretend like I had any idea what the market wanted or how much of it they wanted. No, I genuinely became a business expert watching these shows. I'm like ten percent from blah, blah blah, I like what, I don't know what the hell they're talking about. What is this? right? But you know, you feel like you understand. ye, it feels good to pretend Well, today's scammer is one of those suspiciously rich, dubiously credentialed investors who love to promise the world to vulnerable entrepreneurs who dare to dream big was only in it for his slice of the pie It's late twenty fifteen, and Parker Owen is walking into an office in a small town in Alabama Parker is a former Auburn University student in his early twenties, with blonde hair, blue eyes, and a baby face. He looks like he just wandered out of a frat house Today, he isn't looking for a party He's walking into a startup incubator a place made for people like him who have big entrepreneurial dreams The incubator is called Roundhouse, and the inside feels more west cooast startup than rural Alabama It has a sprawling, open concept floor plan, with members riding around on hoverboards and staffed pounding monster energy drinks. There's a creative and collaborative atmosphere, a sense of optimism, and of course, free snacks But Parker isn't here to soak up the vibe. He's meeting with the founder of Roundhouse. A meeting that could be a make or break moment for him He's trying to raise two point five million dollars for his company, and he's about six hundred grand short Like many incubators, Roundhouse provides resources and mentorship to entrepreneurs with promising ideas in exchange for a cut of the pie if the business succeeds. But what makes Roundhouse unusual isn't how it works It's where it's located a small town not far from Auburn called Opalka At Auburn, Parker launched a company called Fraps That's short for fraternity wraps. The company makes advertising decals for college students' laptops, the same way companies wrap cars with ads Using tracking software on the laptops, students are paid for every minute the ad is visible in high traffic areas on campus Yeah, that isn't a surveillance nightmare at all. No, it's totally fine. It's totally cool It's scrappy, it's very college, and Parker genuinely believes it could turn into something big But right now, it's stuck in that in between phase where people are interested, but without more money, the company can't really grow So some of his old business professors recommended he hit up a guy named Kyle Sandler, the founder of Roundhouse Kyle seems like your typical startup founder He's forty years old, wears wire rim glasses and promo t shirts for tech companies, and he's a social butterfly who loves to yap And he has an impressive resume Wd around town is that Kyle was one of the first one hundred employees at Google So, as Parker gets ready to pitch, there's a lot wriding on how this goes. If Kyle likes Fraps, he'll invite Parker to join Roundhouse and help him raise the rest of the money he needs Parker would have the support and investment to make his business real and he wouldn't even have to leave Alabama to do it Lically, Kyle is immediately interested in Fraps Here's Parker talking about it years later on the HBO show Generation Hustle He told me from point blank. He said, this is something that I want to invest in. I can write you a check right now for the full two and a half million I mean, this is how these things happen, right? Like you meet a guy who believes in you and nothing bad ever happens after that. Yeah, it's a dream come true and that's the end of this episode Kyle doesn't actually write Parker a check for two point five million dollars, but he does welcome Parker and Fraps into the official roundhouse portfolio Parker is thrilled But as he settles in at Roundhouse, he can't help but notice a few things about Kyle that seem U notot what you'd expect for a super successful tech guy For one thing, Kyle's teeth Okay, sure, it's kind of superficial, but Kyle's teeth look like they've never seen an orrthodontist Parker can't help but wonder how someone who's supposedly so rich never bothered to get his teeth fixed That is a pretty good observation. Even you know, Cardi B raps about it, Got a bag and fix my teeth, you know? Exactly Well Parker notices other things too like when Kyle invites him and some of the other entrepreneurs over to his mansion for a party. The property is huge with an Olympic siz swimming pool But when Parker walks inside, he's shocked to see that it is an absolute pig sty almost literally It's not just untidy or cluttered. There's actual animal poop everywhere from Kyle's dogs, cats, and birds that he hasn't bothered to clean up Another time, Parker is at Kyle's house for a movie night And when Kyle goes to queue up the film, Parker clocks that Kyle's DVR is filled with episodes of American greed The CNBC show about financial crimes, Kyle is obsessed with it Parker's spidey senses are tingling And he's onto something, whether he knows it or not Because the reputation Kyle has in town is built on a foundation of lies The mansion, the parties, the animals are all being paid for using investor money And to keep it going, Kyle needs to bring in more and more shareholders But for the dozens of entrepreneurs and investors who've already bought into the dream of a Silicon Alabama Believing in that dream is about to come at a very steep price From Audible Originals, I'm Sachi Cole, and I'm Sarah Hagy. and this is Scamfluencers Kyle Sandler spent much of his life on the outside looking in, trying to find himself and where he fit in He wasn't the smartest guy in the room or the most connected, but he was a natural at sales and knew how to make people believe. And when he landed in a small Alabama town dazzled by big tech dreams, he realized that gift was worth a lot of money Kle opened Roundhouse, a startup incubator promising Silicon Valley riches in the heart of the South All he needed was investors. and in Okaka, Alabama, they weren't hard to find. Just drop the word Google and wallets opened. But Kyle wasn't building the next big thing. He was building a lie. And by the time the bright eyed founders and small town investors who bought into his vision start asking questions, it's already too late This is Kyle Sandler, the Alabama Startup sccam Lin. Three decades before Kyle was calling the shots at his own incubator, he was an awkward pret teen trying to make friends in Baltimore It's the mid eighties and Kyle's goofing off with four friends at a mini golf course I'm picturing it like a scene right out of Stranger Things, with all your classic put putt obstacles and a handful of arcade games near the front The kind of place where unsupervised children can spend their whole allowance in one afternoon Chile's just ten years old, Pacific Island are adopted by white Jewish parents His mom had been told she couldn't have kids, so adopting Kyle felt like a miracle But when Kyle was young, he was diagnosed with leukemia He was in and out of the hospital until he was around eight years old when the cancer finally went into remission And despite what the doctors told his mom, she is able to have kids. And over time, Kyle ends up with four younger siblings, all white, like their parents His mom always tries to treat Kyle the same as her other children As Kyle gets older, he feels his outsider status more and more. He also suffers his fair share of bullying desperate to fit in. So Kyle learns to go along with whatever his friends are doing whatever it takes to be part of a group even if it crosses the line which is how Kyle gets embroiled in a mess at the Pot putut course. While we don't know exactly how this all went down, I like to imagine that Kyle and his friends are messing around, sending golf balls flying all over the course when the owner of the place approaches They think maybe they're in trouble, but instead, the guy makes them a wild offer. How would they feel about burning the place down He'll pay them five hundred bucks Presumably, the owner wants to cash in on the insurance policy Although why he's outsourcing arson to a bunch of kids, we don't know. You know, I really hope these kids ask for more money because that is not enough to burn a place down Yeah, right. well, these kids are ten and this is the eighties. So they're like, hell, yeah. five hundred dollars is a lot of money So Kyle and his friends come back later at a designated time. The owner has left the doors unlocked and put out gasoline. But when the kid criminals arrive, they see an opportunity to get even more cash Here's Kyle talking about it on the locked in podcast Dawns on us that there's like ten video game machines in there. And we have the keys to the place So We open up the video games and they're filled with quarters because I guess he didn't think about it either. So the kids run home, grab pillowcases, and then return to fill them up with all the loot When they've unloaded all the change, they do as the putut putt owner requested and light the place on fire It's just so crazy to trust literal children to help you commit your insurance fraud by burning down your business. Yeah, I mean, these are not career criminals. They're just a bunch of ten year olds So a few weeks later, one of them starts buying treats for everyone in their class from the cafeteria, all with quarters That gets the attention of the principal who asks him where all the change came from kid folds immediately any rats on the rest of the gang, including Kyle Fr Kyle's recollection, all of the kids end up having to do some community service. The adult in this mix, the mini golf owner, goes to prison For most people, this would be a wake up call Kyle can't seem to shake his troublemaker behavior. Friends remember him regularly taking money from his mom's purse. When his parents promise a reward for good grades, he photocopies the report card of a smarter friend and doctors it Although the copy is done so poorly, his parents sniff it out and are furious. And his early act of pyromania follows him around. A rumor starts circulating that he burned bridges literally in their Baltimore neighborhood But as Kyle gets older, he'll finally find a place where he feels that he belongs. And while he won't need to light things up to impress his friends, he'll be striking a different kind of fire all his own It's two thousand six, decades since Kyle was getting into teenage trouble He's thirty one now, still living in Baltimore, and he's finally found his footing He has a stable job at TMobile and has become one of the top salesmen at his store Today, his supervisor hands him a package to check out It's from Google Kyle's worked hard to become so well regarded at work, but it's been a winding road, including spending his twenties working at radio stations, where he got tangled up in some light pay to play schemes with the record companies. But when the industry cracked down on corruption, Kyle got spooked and he got out He wound up working for T Mobile on a whim, only to find he was a natural at it He has great sales numbers, and he's always invited to employee awards which is how he got on Google's radar Kyle opens the package and pulls out a new phone It has a eririe keypad and looks like a blackberry, but it also has a touchscreen. Remember, this is two thousand six, and it's still a year before the first iPhone was released and everyone got used to touchscreens The phone in Kyle's hand is so new, it doesn't even have a name yet The rumor is that Google will call it an Android. Most people would play with it for about a week and move on Kyle whips out his handicam and records his experience trying out the Android And then he takes it a step further. creating what he calls the first Android blog called the Droid guuy This is before social media influencing was even really a thing. and a full year before the Android becomes available to the mass market It is really cool that he had these instincts to be like, oh, people want to know about this. Maybe I'll upload it. And he's also just so lucky that there's no competition Because imagine if there was. I don't think you would be the one to shine probably. Yeah. I mean, it was a moment in time. And the blog does take off. Apparently, people are dying to know more about this phone Kyle expands the blog, writing up reviews and reports of other phones and new releases The blog becomes so successful that he's able to quit his job at T Mobile and focus on the droid guy full time He even starts putting out video dispatches from tech conferences and hosting some of his own meet upps for Android lovers The droid guy opens doors for him Google flies them out to their headquarters where they wine and dine him Kyle takes photos of himself at the Google campus and uploads them to Facebook At this point, he's a legit tech influencer with a big presence on Twitter, YouTube, and Byspace. RIP And the droid guy gives him one more thing he wasn't expecting Mve. Allie Fox, who manages a T mobile store outside of Birmingham, Alabama, reads the blog and reaches out asking if she can write for the blog too Ple says Yes. And soon, they're meeting up at tech conferences around the country At one of them, their professional relationship takes a personal turn They hook up And nine months later, in two thousand seven, their daughter is born His life is going amazingly. I am so scared to know what happens next because this is the dream for most people. Yeah, man, it's all pretty good The droid guy continues to flourish, and in twenty eleven, after running the blog for five years, Kyle claims he sells it for ten million dollars This nets Kyle more than enough money to set up a stable, comfortable life for him and his family. He and Allie have gotten married and they move to Auburn, a small college town in her home state of Alabama Kyle isn't done with tax Flush with cash, he launches a new blog called Nibblets which is all about startups in smaller markets outside the big financial hubs given where he got his start in Baltimore Maybe Kyle sees opportunity in reminding Silicon Valley that innovation can happen anywhere And he gets involved with President Obama's startup America initiative which also promotes entrepreneurship in smaller cities. Then, Allie's mom introduces Kyle to her friend, the administrator of a tech incubator at Auburn University. The administrator loves the Nibblets vlog and suggests that Kyle run it out of Aubberurn's incubator notot long after, Kyle becomes their entrepreneur in residence, providing advice and mentorship to business students. Or at least that's how he recalls it. Auburn University has denied Kyle had any official role on campus Around this time, a new idea starts to take shape Kyle sees all of these college kids starting new companies Anything they create using university property is technically owned by the school. He wants to provide an off campus environment where they can maintain ownership over the companies they create So Kyle decides he'll open his own incubator, where he can help shepherd them through and then take a cut of the profits on the back endnd. In a small town dazzled by big tech names, he's about to discover just how far a good story and a photo on Google's campus can take you It's twenty fourteen, and Emily Boss is walking into the best opportunities she's ever had wororking for Kyle Sandler at his brand new startup incubator in Opalka, Alabama Emily is in her early thirties with a shaved undercut hairstyle, big jewelry, skinny jeans, and a thin funky scarf. She has a degree in entrepreneurship and has been waiting for a chance like this In a town of around thirty thousand people, these opportunities don't come around often The town is still shaking off the hangover of the two thousand eight financial crisis six years earlier. But the local government has been making moves. They recently approved an initiative to make Opaka one of the first gig cities in the US, a place with internet speeds of up to one gigabyte per second It's meant to lure tech companies and remote workers to help reinvigorate the local economy and Kyle's new startup incubator, called the Roundhouse, is proof that it's working When Emily arrives at work Her new boss, Kyle, greets her at the door He directs her towards her seat at the front desk where she'll work as a community director Emily is thrilled to be a part of revitalizing Opaaka. And when Kyle tells her about his past at Google, it confirms the rumors she'd heard that Kyle was one of their first one hundred employees Emily has no reason to doubt him The whole town seems excited to have him around. Here's Emily talking about it in the HBO show, Generation Hustle Ile definitely out a way of talking about things that made you feel like, wow, I want to know about that. Like virtual reality, like buzzwords that people around here didn't necessarily understand and wanted to know more Yeah, this sounds like he also was very ahead of the curve when it came to like guy promises, you know, knowing a lot of the right things to say, the right words to use, getting people curious. That's how a lot of people get by. Yeah, it's really effective. And Emily throws herself into the job She reaches out to potential new members and organizes community events and pitches, where she and Kyle share the roundhouse business model. Startups apply to join, and if Kyle thinks their idea has promise, he brings them on In exchange for equity in their business, Kyle gives the entrepreneurs space to work resources like printers and free energy drinks, and mentorship in how to build and grow their companies Roundhouse also has investors, people willing to spend upfront in the hopes that one of the fledgling startups will make it big and pay them huge dividends Kyle also takes his pitch on the road to local rotary clubs the Young Republicans Club, and even Auburn University He's looking for people to buy equity shares in the incubator And based on the valuation of Roundhouse, he's allowed to fundraise up to half a million dollars from outside investors. Selling any shares beyond this amount would be illegal under securities law Kyle tells Emily that investor money will flow directly to the startups through separate deals he structured with each founder Emily is focused on the vibes of Roundhouse more than the financials, so She takes his word for it Why wouldn't she Kyle's sparkling backstory, confidence and smooth talking Has the town of Opalaka entranced Investors aren't just interested, they're knocking down his door. No one's asking follow up questions or doing any due diligence So, when one of the tech world's most controversial players comes calling Kyle won't hesitate to expand his seemingly unchecked influence It's early twenty fifteen, a few months since Roundhouse opened pulls into a parking spot outside the incubator in a brand new jaguire the flashy sports car turns heads in Oaka which is exactly what Kyle wants After all, he has a reputation to maintain as a former Google exec and tech capitalist millionaire. But The truth is, that background at Google, it's a total sham A while ago, someone saw a Facebook photo of him on Google's campus and asked if he worked there. And Kyle just said yes and ran with it. It's been part of his lore ever since, and he's never corrected anyone And Kyle's payoff from the Droid guy burned through all of it So now, he's paying for his jaguire, his rent, and childcare by comm mingling his own savings with his investors' money He still believes one of the companies at Roundhouse will hit it big and make everyone rich That won't happen unless he keeps up the facade of success Plus, this persona has finally earned him the praise and attention he's wanted ever since he was a kid I cannot believe he burned through all of that money so fast and that he in the time he was spending that money, couldn't figure out a way to leverage the thing no one else was doing. Like what Is your problem? You had everything, you had everything. Yeah, he really blew it, but no one else knows that yet. And his patina of success is especially important today. because Kyle has a very important meeting. An old acquaintance recently reached out and said that John McAfeee wants to talk to him That would be John McAfee of McAfee Antivirus Sarah, what do you know about John McAfee I know that this guy was making some very crazy front facing videos on social media before he Died mysteriously. I don't remember what it was But I remember being like this guy is so weird and he was he turned into like a real conspiracy dude, right? Yeah, you're right. He's a real weirdo and a definite scammer. In fact, he is our very next episode. So we're going to get into all of it. But for now, here's what you need to know John's Guyin is late sixties with leathery skin from the sun, frosted tips, and a creatively styled goatee. He's both charismatic and unsettling type who's hard to put your finger on, and you can never fully trust him John recently founded an incubator like Kyle's where companies pay twenty grand to join. In exchange, John would leverage his famous name and promote their company on social media. Things have gotten messy Some of his incubator companies allege that John hasn't been hold up his end of the bargain So, John wants Kyle to absorb his startups under the roundhouse umbrella He's hoping that he'll wipe the slate clean. Even though John's reputation isn't what it was at the peak of McAfee Ativirus, his name still opens doors in the tech world Ch jumps at the chance to work with him John is living in Tennessee, but visits Opaka every couple of weeks to check on his incubator companies And it doesn't take long for Kyle to discover how far John has fallen He's dead broke Pya later claims that when John comes town, Kyle foots the bill for the hotel Over time, he and John develop a close relationship Kyle helps get John a feature in USA today, promoting their partnership to the world According to Kyle, that gets the attention of a company called MGT Capital Investments MGT has bounced from industry to industry, but now they're looking to pivot to cybersecurity And they want John to sign on as their new CEO They offer him an eye popping forty million dollars John turns it down He thinks that between speaking fees, consulting, and his incubator companies, he can make it on his own. Kyle can't believe it That's so much money. Plus, secretly, Kyle thinks that the startups John brought in under Roundhouse are shit with no potential. So Kyle isn't shocked when John is still struggling six months later can't have his partner up against the ropes like that So they start thinking about ways to drum up press and attention again. Here's Kyle talking about what happened next on the podcast, Rise Above ree shots to the windman. We're just talking at this dinner And me and another buddy were like, I said I'm like When you got to do something big like run for president I like this is how this came up for realil This is actually a thing people were doing at the time. It was, you know, twenty fifteen, all these random people were running for president This is just so funny and weird. It's so weird Kyle says it is a joke The next day, John calls him up and says that he's in september twenty fifteen, John McAfee files the paperwork to run for president Kyle is named a campaign advisor and they make the roundhouse his official campaign headquarters John is embraced by the Lbertarian partarty, and he starts doing surprisingly well Not just politically, but financially They start raaking in millions of dollars in donations in Bitcoin and through PayPal But according to Kyle, a good portion of that is never reported By the end of the year, Kyle leaves the campaign, supposedly to focus on his own businesses. But maybe it's just a move of self preservation He knows John's not going to win decides, Kyle's gotten what he wanted out of it. attention, credibility and more investors eager to get in on Roundhouse Plus everyone at Opaka loves him Yeah, he did get all that, but also he still has all this money to pay back that he's been using as his own. So I don't really know what the truth is here. Like what's real? Yeah, you're right. Here's another chance for Kyl to pay people back and make things right, but That's not what happens All his friends and neighbors are none the wiser On Kyle's fortieth birthday, the town all gets together to throw him a surprise party Kyle is decked out in a dark suit and a plastic top hat He's smiling from ear to ear as the mayor reads a proclamation declaring his birthday is now Kyle Sandler Day Kyle has made his mark on Okolka But he's nowhere near finished And an earnest, young investor with a squeaky, clean story is about to give him something John McAfee never could a heartwarming way to launder his money and his reputation I feel like a That's not Kyle's relationship with John McAfee is just one way he's garnering national attention. Around the time Kyle first gets involved with John McAfee in late twenty fourteen He also discovers a local superstar in the making. Kyle has been volunteing with Opaka Middle School's Young Entrepreneurs Academy prorogram And there's one young man whose idea sticks out above the rest thirirteen year old Taylor Rosenthal Taylor is a quietly confident kid with an original style Beieber haircut and a peeeee football player vibe I have a photo of him in front of his pitchboard. Sarah, can you describe it Okay, he's wearing a bowling shirt that's red stripes on black. The whole theme of this is red and black It's branded with his, you know, business idea and he's in front of a poster board that just like You can tell he actually made this because only a child would use those colors and that contrast. No shade to this child, but He needs to loosen up a bit. He's so cute. He looks too professional. He's a baby adult. He is one of those baby adults. I know, and I'm just kind of like, just be a kid, you know, pooor guy. Oh, I love him. So my dad's gonna happen to him. obviously great. I really like his little bowling shirt for what it's worth Taylor's idea is called RecMed, and it's deceptively simple He's been playing baseball for years, and he's noticed that often when a kid gets hurt, parents don't have what they need to help sometimes not even a bandid So Taylor's idea is to set up a pop up stand selling first aid kits at sporting events The kidits come in three sizes and include supplies like cold packs and gauze Taylor developed the idea with his mom, an x ray tech and his dad, a sports medicine trainer Kyle listens intently to Taylor's pitch, and he loves it. He approaches Taylor and invites him to become the youngest founder to join Roundhouse. Taylor gladly accepts, and within six weeks of their first meeting, Taylor launches his debut firstirst aid pop up. Taylor's got a great idea and a go get her attitude And Kyle He says he believes in the kid And maybe he does But he also knows that Taylor has incredible public relations potential The roundhouse needs a boost to keep the cash flowing in and Taylor's fresh face will make for incredible investor bait. A few months later, Taylor stands in front of a green screen, ready to shoot his first promo video He's wearing his recc med uniform, a red and black bowling style shirt with the company's logo over his heart The whole thing is very DIY, and while he's more professional than your average teenager, there's no denying that he is still a kid whichich is honestly half of the appeal for investors Here's part of his pitch. Have you ever been to an amusement park and your child falls to the ground and scrapes their knee? thenen you had to walk all the way to the front of the park to get a band aid. This cuts into the time you could be having a blast and riding rides Why does it sound like he's about to cry? This could tell all the time you could be having a plasmatic ride. He's just an intense kid. I'm not making fun of him. I'm very, very endeared by him It is just so funny how intense this all is and how once again, this kid is Something is gonna happen and I'm scared. I know, I know. I'm sorry. tryry to hold on. Well, Taylor, his parents, and Kyle have all been working together to take his idea to the next level what started as a pop up stand has morphed into something bigger A vending machine stocked with first aid kits. The machines will cost five thousand five hundred dollars wholesale, and the plan is to sell them to places like stadiums and amusement parks With Kyle's help, Taylor and his family have made a prototype for the machine and raised one hundred thousand dollars in angel investments Taylor is over the moon Since joining the roundhouse, he's watched Kyle and the other adults take his ideas seriously. He started going to the coworking space after school and even over Christmas break And then, Kyle approaches Taylor with some incredible news The Healthcare company has offered to buy RecMed for thirty million dollars. I know in these kind of text stories, a lot of money is thrown around, but like this kind of stuff just doesn't happen at all anymore today with a child. And to me, it is so crazy that there's this offer for thirty million dollars. and it's for a child's vending machine. Yeah, man Taylor doesn't even know how to comprehend a number that big He's eager to cash in. Kyle has a different idea He suggests that Taylor holds out for an even better deal. Maybe they'll get forty million, even fifty millionars. And Taylor trusts Kyle He wouldn't be where he is now without him So with Kyle's encouragement Taylor and his parents decide to turn down the thirty million dollars offer Roundhouse capitalizes on this moment by sending out a press release announcing the offer and the rejection. The teeen' CEO turning down thirty million dollars drums up a lot of attention Taylor starts getting invited to consumer tech conferences like CES and Tech Crunch Drupt The Huffington Post covers his story, and Taylor appears on CNN and MSNBC All those hours practicing his pitch with Kyle are paying off Taylor is poised, earnest, and believable. becausecause he is completely genuine Here he is being interviewed by Stuart Barney on Fox Business You turned it down I said earlier that you were a very smart young man What are you doing? Turning down thirty million dollars at the age of fourteen Oh It took a while to think about it, but We had felt like the time wasn't right. We kind of wanted to grow and develop the company a little bit more I mean, yeah, the point is that he will be more valuable, that this thirty million isn't anything, which is a huge gamble. It's betting on the future basically. Well, at first, the decision to turn down the deal seems like the right choice Johnson and Johnson invite Taylor and his parents to their offices in june twenty sixteen for a meeting Kyle also shows Taylor emails that say Six Flags is interested in buying one hundred vending machines. A deal worth more than half a million dollars Taylor is probably so grateful for Kyle's guidance The Roundhouse just had its first major success with one of its other startups A secure file sharing platform called DemonSaw recently cut a deal worth forty million dollars It's proof that the kind of money Kyle is promising Taylor can actually happen But what Taylor doesn't know is that this recent roundhouse success was a fluke Kyle is still stealing from the incubator's investors and he hasn't been completely honest in his dealings with Taylor either. And once Taylor realizes that, He'll need more than a band aid to heal from this betrayal twenty sixteen, and Kyle is having a drink at eighth and Rail, a local oppaica bar It's the kind of place where you can listen to live music or watch the game, but also order sushi and a slice of cheesecake Kyle has barely touched his drink when an enthusiastic investor slides into the seat next to him and starts talking about Roundhouse He's heard about the incubator and is excited about its potential And he's willing to cut Kyle a check for thirty grand right now The media attention that Taylor and Reckmed are bring to Roundhouse has inspired people in Olika Tons of locals want to buy equity stakes in the incubator Kyle has a problem He's already hit the legal cap He sold five hundred thousand dollars in equity, the maximum amount he's allowed to sell under securities law What he should do now is pause fundraising and focus on actually developing the startups he's already brought in That's how the model is supposed to work And that's how his investors will get paid. thirty thousand dollars is sitting right there. And Kyle has never been great at saying no to easy money So he gives in and he takes the check. And once he crosses that line, it becomes easier and easier to take more money By the time it's over, Kyle has sold two hundred percent of Roundhouse's equity to more than seventy investors twice what he's legally allowed to do Here he is talking about it on the podcast Rise abbove. Eventually I do run out of equity and start overselling doing stupid, totally horrible reckless things. thinking that and hoping and praying that one of my startups becomes like the next big thing and I can right all these wrongs You know, for a lot of these stories, I also never know if the people are like intentionally scamming or if in their minds there's like another story of like Oh, I will never get caught, notothing bad's gonna to happen because these things will work out and I'll be able to pay everything back and it'll all come out in the wash And it's so crazy to me that you could be dealing with these huge amounts of money and think that there is still some way it's just gonna be fine. Yeah, it's a really powerful level of delusion. And meanwhile, Kyle is still mixing investor money with his personal bank account He's been using that slush fund to buy twenty four cars and three houses, including one in Mobile where his young mistress lives Kyle has also been lying to his star founder, Taylor For example, that thirty million dollars offer for RecMed It was fake And that's why he encouraged Taylor not to take it. And the interest from six flags. Also fake But Taylor repeating those stories on CNBC and CNN helps bring in new investors. Taylor doesn't have a clue he's being used as Bait. So also, you know none of these news organizations even ask, hey, can we see the offer, like show us anything that proves this is real? No Not all roundhouse startups are happy with Kyle Parker Owen, the guy behind the laptop rap company Fraps is pissed. It's been almost five months since he joined Roundhouse, and he hasn't seen any money He's been draining his savings to keep his company going and only has eight grand left in his bank account But when Parker confronts Kyle Kyle is remarkably unsympathetic His whole demeanor seems to change and he becomes completely aloof Smirking, he tells Parker that this is just how the game is played, and they're going to have to renegotiate Likely because he just doesn't have the money to give But Parker rejects that idea and packs up Fraps is done with Roundhouse for good. Kyle has been running this scheme for years now, and it's been working The media attention, Taylor story, the McAfee connection dazzled his investors and kept the questions at bay But Parker won't be the last person to start asking where the money went And when other partners raise the alarm Kyle's operation will start to buffer and fail. It's june twenty sixteen, and Emily, the roundhouse community manager in Kyle's right hand, has been fielding calls from anxious investors all week. They aren't calling to hear about new startup pitches They want to know what's happening with their money Despite pumping millions into Roundhouse, none of the investors have seen any dividends Emily assumes that there must be a reasonable explanation and fills Kyle's calendar with meetings for them to talk about it but he blows them all off Then, Emily receives a notice that Roundhouse is overdue in its utility bills She finally gets Kyle on the phone and tells him that they can't even afford to keep the lights on she demands to know what is going on Kyle asks her to float the money herself and promises to pay her back He says he's scheduled to receive an annuity payment from Google around his birthday in November, and that influx of cash will solve everything He also offers to buy out anyone who's still unhappy Emily just needs to keep the investors at bay until then. You know, it is so cowardly when these CEO's, founders give the gruntw to their underling of being like, okay, so we don't have any money and all you actually have to do is make everyone happy with the fact that there is no money. And I'll be figuring it out outside of frame. Yeah, no worse job Emily is not about to use her own money to cover roundhouse's bills Instead, she tells Kyle that he needs to show up for the investor meeting tomorrow No more excuses She tells herself that it'll all be fine The investors will get their money, Kyle will pay the utility bill, and everything will go back to normal The next day, Emily arrives at the office before Kyle She waits for him, worried that he's going to bail yet again And finally, he shows up. But instead of heading to the conference room, he just goes to a corner and starts working on his laptop. Emily is weirded out. Kyle is the successful entrepreneur and tech is an unconventional industry So she keeps waiting. A little while later, he calls Emily and a colleague into a meeting and assures them that everything will be fine And to prove it, he hands them a document. A fidelity investments report showing all of his holdings See, the money is in there Emily wants to believe him Then her colleague speaks up He looks Kyle right in the eye and tells him he knows that that document is fake He watched Kyle photoshop the Fidelity logo on the top just minutes earlier Emily can't believe it She had no idea that Kyle would go as far as forging a document to keep up this ruse Here she is talking about it on the Hulu series Scam Godddess It was F wrenchy Everything I thought was real was fake and that he was a lie and that I knew it in my heart at that point I do feel bad for Emily because this was also before everyone knew what we know now about how easy it is for these founders and tech people to be scammers. Like now it's synonymous with scamming sometimes if you say certain buzzwords But these people legitimately had no idea what they were in for. Yeah, Emily had been holding ono the possibility that everything was fine up until that moment And now that belief is gone. She's not alone Around Opaka, the cracks are showing Kyle's charm has fully worn off Some angry investors have started digging into Kyle's past and have sniffed out his lies, like that he never actually worked at Google. Emily is crushed. This isn't going to stay a quiet internal conflict between Kyle and his investors. There's major money on the line And some of the people he's taken it from want to see Kyle pay the price. with more than just cash feel like I That's It's spring twenty eighteen, almost two years since Emily and her colleague confronted Kyle, and FBI special agent Chris Gravell is in the bureau's Alabama office planning a major sting They're about to nab an elusive fugitive Pyle Sandler. Agent Rravell's been working on this case since twenty sixteen, when some of Kyle's investors tipped off the Feds that he'd stolen their money The criminal background check turned up several old fraud and theft charges from a business Kyle started in his twenties And she discovered that he's been using different names for years to secure fraudulent loans So, in december twenty sixteen, she sent Kyle a target letter, letting him know that they were looking into him. She ordered him to report to the FBI offices to discuss the investor's allegations Shortly after the letter went out, Agent Gaal got word that Kyle had closed Roundhouse and skipped town Then, he ghosted Agent Griravell and never showed up to the meeting with the FBI So the manhunt was on Eventually, Agent Gravell tracked him down in Texas He was living near Texas andM University on a ranch next door to Chuck Norris. And he had the audacity to set up a new media company and solicit investors There are just so many details about the choices Kyle makes that are so funny outside of the scam. L you live on a ranch next door to Chuck Norris. What the hell? And also you ran out on the FBI and you're still trying to get investors. I mean, it's arrogance beyond compare Agent Cravevel has set up the perfect sting. thanks to a local car dealer who has some beef with Kyle Apparently, Kyle stiffed am on some payments and slandered his business online through a burner Google account So now, the dealer is more than happy to help the Feds He and Gravell devise a plan where he'll invite Kyle to meet up to discuss Kyle's late payments And then, the FBI will swoop in and bring Kyle to justice. Gervell is back in Alabama when her Texas counterparts put the plan in motion She watches the bodycam footage of the sting later An officer approaches Kyle in the parking lot and asks if he's Kyle Sandler House says Yes, and the officer puts him under arrest It's all pretty anticlimactic except for the woman standing next to Kyle who is emotional and extremely confused Apparently, she's Kyle's new third wife evenven though he never actually got divorced from the first two. So this guy is Paullly also. worst guy you know has two wives. ye Kyle is booked in Texas, where he sits in jail for about a month while authorities arrange his transfer back to Alabama Money finally gets there He learns he's being charged with wire fraud and securities fraud Each count carries a maximum sentence of twenty years, so he could be going away for a very long time Kyle is staring down a future in prison There's no perfect pitch or angel investor who can save him now He has one card left to play before the court radical honesty In february twenty nineteen, Kyle walks into a courtroom in the U. S. District Court in Alabama He enters a room wearing an orange jumpsuit and shackles. He's visibly nervous, humbled by his current circumstances The evidence against him was so strong that Kyle pled guilty to both counts Now he has one more chance to address the court before learning his fate. His lawyer has told him he'll likely face four or five years in prison As he listens to the U. S. attorney go on and on about how he used people's hard earned money as his personal piggy bank. Kyle worries and might be longer than that. one of his investors implores the judge to impose the maximum sentence especially since Kyle exploited a child to defraud his investors Sarah, can you read what he tells the judge? Yes, he says, quote Remorse doesn't begin to say it I'm disgusted with myself Yeah, T little too late, brother. Yeah. Remorse doesn't begin to say it. Maybe try. It's a good place to start actually Well, Kyle braces himself for the judge's decision. He's sentenced to five years in prison, and the judge orders him to pay one point nine million dollars in restitution In prison, Kyle finds a new identity for himself He gets a job in the kitchen, he studies to become a paralegal and starts helping his fellow inmates with their legal filings He also comes out as gay and starts a relationship with a man that he meets in prison Towward the end of his sentence, Kyle is moved to a prison camp where he gets more freedom Then, the former droid guy gets in trouble for having a cell phone So he set back to a medium security prison until his eventual release in february twenty twenty two Kyle is out of prison now, and these days, he hosts his own podcast about the experience He also runs a prison consulting company called Prison Tips, helping people prepare for life behind bars. As of last year, he is still with the man he met in prison. Emily was hired by a new company in Opaka called Cab a coworking space that opened in the old roundhouse location She returned to her role as community manager and worked there for six years until twenty twenty one She's now a freelance photographer and still living in Opaika Roundhouse is not listed on her LinkedIn profile After Roundhouse First closed, Taylor's father told a reporter that they were working to get RecMed back on track. But the company never really took off Taylor'sinkedIn profile still lists him as the CEO of the company Kya wanted to prove that the spirit of Silicon Valley could thrive anywhere in the country That small towns deserve a shot at the big dream It wasn't a bad idea. It just needed someone honest enough to build it The more we host the show, the harder it is to trust somebody with the backstory of like I was bullied because it's like, well, Are you going to do something to me about that? Yeah, it's like making my trauma everyone's problem by scamming. Yeah Kyle also was kind of on the cutting edge of a lot of this like tech reviewing blog stuff. Yeah. you know, he was one of the first. he certainly was the first to get that Android And he could conceivably still be doing that today. I mean, looking at phones and talking about phones and talking about how your phone works is its own cottage industry. I mean, it is like how wirecutter exists And he could still be doing that, but instead he got arrogant, like everybody we talk about on the show, and he was like, Hmm, time to be weird to a child. Oh, absolutely. yeah, that's so true. It's like a lot of the people who are the most famous in those worlds have been doing it since YouTube times. like when Youube was new So in my mind, it's like, wow, if you just Again, like all our scammers, if you just had the patience and believed in yourself, He could have been swimming in cash by now. But I think he was always meant to scam also, he just seemed like a scammer. It's people who just are kind of like losers and can't accept that they're not cool. The thing about Kyle's idea that these smaller cities need incubators so that they can be titans of industry, I guess it's true, but I think it also meant that he could take advantage of people because maybe they wouldn't know better I mean, you can already take advantage of people in Silicon Valley pretty easily. So I imagine taking advantage of someone in Opaka is also very doable. Oh for sure. I think a huge part of it is that he went to this town really needed something like this and he ended up becoming kind of like the king of a very small world I feel like this scam is obviously awful to do to people because they're coming to you with all of their hopes and everything they want for their future and they think you're going to make them rich. But doing that to a little boy in a bowling shirt is so much more evil than doing that to any adult. Yeah, and it's also like a pretty disprovable lie. I mean I'm questioning a lot of the people involved in this, obbviously no shade to the child. Once again, I must reiterate, this kid is cute, so cute It just makes me so angry that it's that easy to fake that there's a thirty million dollars offer. It's like nothing is real. I mean, I'm a little comforted at least that the thirty million dollar deal was fake because if they had turned it down and it was real, I think that would have been We would not be able to get through this episode. That would have taken a toll on that child forever. Yeah. Yeah I feel like too, this is another story of a scam artist who just couldn't live in his full truth, like couldn't really be himself, felt like he was at odds in his family because of his race, probablyro felt that way at school because of his race and clearly because of his sexuality as well. I mean comoming out that late in your life, that changes how you move through the world because you can't really be yourself. I think he was just so used it And so what's one more lie about money when you're already lying about who you are to yourself It just seems like he got really used to feeling like a fraud and in turn kind of became one or just feeling like Well, nothing's real, M as well just make everything up Does this make you feel more suspicious of the shark tank investors of the world? or do you feel like now you have more respect for them because they did it legitimately Oh, honestly, I have not a lot of respect for any of this kind of. L for as much as these people succeed, they also fail and make really bad investments. It's like kind of just these chances they're taking with crazy amounts of m. Also Children shouldn't be involved in the gambling of being in startups. againg, not to discourage a child from trying, but to me it's like, it's a disgusting sick world. Let kids be kids. Kidsn't have jobs at all I think the lesson is that we have to keep children out of first round seed investment for sure. They should be running lemonade stands And being loud on the subway, they should be ripping sigs behind school and shooting cans with a BB gun. And I do not think they should be in investor meetings with Johnson and Johnson Kids used to play with slankingshots. That was enough for them. And now it's seed money. No, thanks. Get out of here. All it took for us to become our parents was hearing about a little kid get taken advantage of by one investor. You know when I was a kid, my favorite toy Wheel and stick. Wheel and stick. I used to spin a quarter around. That's all I needed. A quarter in the sun. Why isn't this boy outside burning ants with a magnifying glass? We're doing boomery nostalgia You know what? It's also pretty crazy he has his story forever now. Like, hey, like what was your childhood like? Okay, so when I was thirteen, I came up with these vending machines And this guy basically lied. like you're part of this crazy story where like, listen, I think you either get money or you get a good story. so it's good that he got a good story. Okay, write that down. You get money or a good story. Merch, That's the lesson. You can either become immediately wealthy, but possibly in a dubious way or You're gonna write a really good memoir one day, man. Yes. abbsolutely From Audible Originals, this is Kyle Sandler, the Alabama startup Scam for Scamfluencers. I'm Sachi Cole, and I'm Sarah Hagy. If you have a tip for us on a story that you think we should cover, please email us at scamflucers at audible d. com We use many sources and our research, a few that were particularly helpful were Scam Godddess's episode The Gig City Grift, Generation Hustles's episode The Alabama Exit. He rootde into Alabama A Tech Savior, then Swindled millions, by Jay Reeves for the Associated Press, and the Opaica Auburn Mses Round House Closes by Tyra L. Jackson and facing the fallout by Rebecca Martin, along with additional reporting in the Opa Lka Observer Jessica Ford wrote this episode, additional writing by Us, Sachi Cole, and Sarah Hagy. Alex Byurns is our story editor. Our senior producers are Sarah Any and Jinny Bloom Our associate producer is Charlotte Miller. O managing producer is Desie Blaylock Fact checking by Coalina Newman, sound desesign by James Morgan. adddditional audio assistance provided by Augustine Lim, ourur music supervisor is Scott Alasque for Freeze on Sync The executive producer for Audible is Jenny Lauower Beckman He of Creative development at Audible is Kate Navan The He headad of Audible Originals, North America is Marsha Louis. The Chief contontent offfficer is Rachel Guzza