[triceratops]

Can you explain? "Money laundering" businesses are cash businesses. If the money is already in the legitimate banking system it doesn't need to be laundered, even if it's from an "oligarch". How does this help?

As someone below commented, it seems more likely that the VCs are stealing from their investors.

[cannaceo]

Laundry isn't always cash. Sometimes you've stolen funds from a government or through a banking scam. That money needs to travel through other businesses to be effectively cleaned.

For example, say you were in charge of a private equity fund with a close overlap of executives with a government bank. When investments go well you put them on the PE funds books. When they go poorly you put them on the bank's books. The bank gets a few government bailouts in the process. You now have billions in dirty funds in your PE fund that need to be laundered through investments. A few additional degrees of separation here can be very useful. I've seen this exact situation play out and met some of these guys while trying to do business in Africa.

[wjnc]

The world is more complex than that. Things like sanctions and countries (not) fully implementing the sanctions create a world in which the transport of sanctioned ‘money’ (or money owned by sanctioned people) from place X to Y is only possible via constructions as the one hinted on here. Dirty money is not always cash. Even bank held funds can be dirty enough to require cleaning.

[bombcar]

Yep it may be entirely illegal for a foreign entity to buy fifty million dollars worth of brand new excavators, but entirely legal for them to invest fifty million in crappy startups that burn money buying weird things like excavators.

[triceratops]

Good point, thank you for helping me understand.

[bobkazamakis]

...They're cash businesses when you're cleaning cash - drugs, prostitution, etc

Do you think people are bringing briefcases of cash on the scale of that many millions to a nail salon?

[triceratops]

There are other ways of cleaning bulk cash. Buying real estate in developing countries, for instance. I just thought that once the money is in the legit banking system, as it would have to be for a startup to accept it as funding, it's clean enough. I hadn't considered sanctions though.

[notahacker]

I think the "VCs stealing from their investors" hypothesis is quite plausible, but there's plenty of reasons why someone might need to receive payments as 'investment' or 'revenue' rather than unexplained payments from suspicious people, especially if the money is being transferred internationally. Could also be a way of exploiting 'investor' and 'startup' tax breaks and collecting R&D grants whilst doing as little real research as possible (and eventually, having consumed all the cash, writing it all off as losses against tax bills)

And yes, there are also startups which produce only 'tech demos' of potential new business lines because they've accepted the product they were originally going to buy won't work, but their founders aren't ready give up yet, but not easy for them to convince investors to follow along for 5-7 years without revenue even if they're really good liars...