Ex-startup chief guilty of defrauding workers

The founder of a failed Silicon Valley technology company has pleaded guilty to defrauding some of his employees out of their wages.

Isaac Choi, 36, chief executive of WrkRiot in Santa Clara, admitted to one charge of wire fraud Monday in federal court in San Jose.

It was an unusual prosecution emanating from the collapse of a tech startup, a field in which high initial expectations are often unmet but are rarely connected to fraud by the proprietor.

According to court filings, Choi started WrkRiot in late 2015 or early 2016 to develop software to help in job searches. Prosecutors said he stopped paying some of his employees in late July 2016 but told them he would send the missing wages directly to their bank accounts.

Instead, prosecutors said, Choi sent them forged confirmations of wire transfers, appearing to show they had been paid, to induce them to continue working. Prosecutors said he had also falsely told employees and investors that he was wealthy, had a college degree from New York University and had worked as an analyst at J.P. Morgan in New York.

The company’s impending downfall was revealed in August 2016 in a blog post by its former marketing director, Penny Kim, who had just been fired after submitting a claim to the state for unpaid wages. She described a chaotic situation, with missed payrolls and forged documents.

Choi, in response, told the New York Times that Kim was a disgruntled employee who had been dismissed for cause, and that “all startups have problems.” But he quickly shut down the company website, and ended operations in September 2016.

The two sides in the case agreed that Choi was responsible for $91,000 in lost wages.

Choi’s lawyers from the federal public defender’s office were not available for comment. In a court filing, however, they said WrkRiot was “a legitimate company” in which Choi had invested his own money, and that there was no evidence he had diverted company funds for personal use.

Choi had been in custody since his indictment in June but was released on bond Monday. U.S. District Judge Edward Davila scheduled his sentencing for May 24.