[e1g]

Assuming legitimate operations, this strategy is highly atypical in corporate finance. There is no scenario where this setup has less cumulative risk than keeping cash reserves spread evenly across the top 2-3 banks. For a startup, this is a red flag about the founders' priorities, risk management, and ability to find professional advice.

As an intuitive measure, extrapolate this idea to Apple or Microsoft, which keep ~$10B in cash on hand and also need to protect it.

[tedivm]

To be fair the founder was really incompetent, and the money was pretty much wasted. When the company finally sold it was well worth what my strike price was.

[tome]

> extrapolate this idea to Apple or Microsoft, which keep ~$10B in cash on hand

Literally cash, as in deposits? Or highly liquid assets such as T-Bills?