From startup world to prison: 10 founders facing fraud and justice

The world of startups is characterized by vision, risk-taking, and rapid growth. But where millions flow and innovation meets greed, it's easy to fall from the path of a celebrated founder to that of a convicted fraudster. In recent years, several former model entrepreneurs have been sent to prison for fraud, money laundering, or market manipulation. Here is an overview of ten founders who ended up in prison:

Elizabeth Holmes (Theranos)

Elizabeth Holmes promised nothing less than a revolution with her medtech startup Theranos: in the future, blood tests would be able to detect entire clinical pictures with just a single drop of blood. However, internal documents, lab reports, and emails later revealed that the technology never worked. Nevertheless, results were passed on to doctors and patients - sometimes with fatal consequences. Holmes also deceived investors by presenting third-party tests as her own innovations. In 2022, the court found her guilty of multiple counts of wire fraud. She was sentenced to 11 years and 3 months in prison.

Ramesh “Sunny” Balwani (Theranos)

Holmes is not the only one who was convicted in the Theranos case. As COO and Holmes' right-hand man, Sunny Balwani bore significant responsibility for Theranos' operations. Internal reports showed that Balwani pressured employees to cover up negative test results and sell unreliable analyses as “validated.” He also knowingly deceived investors and doctors. The jury saw this as a clear case of fraud and conspiracy to deceive. He was also sentenced to 13 years in prison in 2022.

Sam Bankman-Fried (FTX, Alameda Research)

The FTX founder was considered a prodigy of the crypto economy. But behind the glamour hid a scheme of massive embezzlement. Customer deposits on the FTX crypto exchange were used to cover losses incurred by his investment firm Alameda Research – contrary to all assurances that customer funds were safe. Bankman-Fried used these funds to finance luxury real estate, donations and political campaigns. The court ruled that this was massive fraud and money laundering amounting to billions. He was sentenced to 25 years in prison in 2024.

Alex Mashinsky (Celsius Network)

Mashinsky positioned his company, Celsius Network, as a secure alternative to banks, offering high returns for investors. In reality, Celsius Network was like a pyramid scheme - customer funds were diverted into high-risk projects, some of which were Mashinsky’s own, in order to conceal losses. When the crypto market crashed in 2022, Celsius collapsed. Millions of investors lost their savings. In 2025, Mashinsky was sentenced to 12 years in prison for fraud, market manipulation, and misleading financial communications.

Changpeng Zhao („CZ“, Binance)

The founder of Binance ran the world's largest crypto exchange for years, but with lax compliance structures. Investigations revealed that Binance had intentionally implemented inadequate anti-money laundering controls, enabling funds from criminal sources to circulate on the platform. Zhao pleaded guilty and was sentenced to four months in prison and ordered to pay a personal fine of $200 million. 

Charlie Javice (Frank)

Javice founded the fintech startup Frank, which was designed to help students apply for financial aid. JPMorgan Chase bought the company in 2021 for $175 million – based on fake customer data. Javice claimed to have over 4.25 million customers. In reality, however, the number was around 300,000 users. When the fraud was uncovered, Javice stood trial. In September 2025, she was sentenced to more than seven years in prison.

Marcus Andrade (AML Bitcoin)

Andrade presented his cryptocurrency AML Bitcoin as forgery-proof, compliant with regulations and technically superior. Instead, he used investor funds to enrich himself – including luxury cars and private expenses. Investigations proved that there was never a functioning blockchain. Andrade was found guilty in 2023 of multiple counts of financial and securities fraud.

Daniel Schatt (Cred LLC)

The former PayPal manager founded the crypto lender Cred, which promised investors stable interest rates on their deposits. But the money flowed into unsecured, high-risk investments. When the projects failed, Schatt concealed the losses by submitting falsified reports. The court saw this as deliberate deception of investors and a clear case of wire fraud. He was sentenced to 4 years in prison.

Trevor Milton (Nikola Corporation)

Trevor Milton, founder of electric truck manufacturer Nikola, promised a revolution in transportation – zero-emission trucks powered by hydrogen. But many of his claims were exaggerated or simply fabricated. Among other things, a prototype that was supposedly driving was merely rolled down a hill in a promotional video. Milton was convicted of defrauding investors in 2023 for driving up his company's stock market value with false promises.

Mirko Hüllemann (Unzer)

Mirko Hüllemann was one of the founders of the payment services unicorn Unzer (originally Heidelpay). Under his leadership, the company grew to become a major player in European payment transactions. According to a report in WirtschaftsWoche, the judiciary is investigating him for fraud and money laundering. The allegations are serious: Hüllemann is said to have misused funds, manipulated financial transactions and possibly concealed illegal transactions. The verdict for Hüllemann is pending.