Episode 25 | Akazoo | The Fraud

The Akazoo fraud stands as one of the most shocking corporate scandals in recent years. Akazoo, a music streaming company, misled investors with false claims of a massive user base, significant revenue, and rapid growth potential. The company reported 4.4 million paying subscribers in 2018 and projected €285 million in revenue by 2021. It presented itself as a cutting-edge rival to Spotify, leveraging AI and localized content. However, investigations revealed this was almost entirely fabricated.

Red flags were evident but ignored. Akazoo had minimal social media presence, negligible Google search volume, and financial statements showing cash burn despite claiming profitability. Additionally, the CEO’s history included ties to a prior fraud case. Quintessential Capital Management exposed the truth, uncovering that Akazoo’s app had only about 40 monthly downloads, fake reviews, and limited availability.

The fallout was swift and severe. Akazoo’s stock collapsed, it was delisted from NASDAQ, and its assets were liquidated. The SEC charged Akazoo with defrauding investors, leading to a $38.8 million settlement. The scandal also implicated Akazoo’s auditor, Crowe, for failing to identify glaring inconsistencies.

This case underscores the dangers of SPACs, which allow companies to go public with less scrutiny, and highlights the critical need for due diligence. It’s a cautionary tale for investors, reminding them not to take company claims at face value and to remain vigilant for red flags.