Obligatory Michael Lewis quote, from Boomerang (2011):
> Yet another hedge fund manager explained Icelandic banking to me this way: you have a dog, and I have a cat. We agree that each is worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners but Icelandic banks, with a billion dollars in new assets.
I find this amusing: I'm from Poland, where after the VAT tax was introduced in the 1990s, there were famous "VAT carousel" crimes, with people ending up in prison. The basic idea was similar, except you also collected VAT refunds from the state.
If you search for "vat carousel" today, it seems this is still a thing.
What if instead of trading dollars I want to promise to trade dollars in the future? My investors need to see me capturing the market. Might even create some panic for added fun.
This took me far too long to figure out that it was parody. I'm sure some VC has at least thought of building a SEC Violations as a Service platform. This is truly the dumbest timeline.
Services in kind is a pretty common business practice. You see this a lot at the SMB level especially outside of the US.
Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping.
At big boy levels this is often structured as “strategic partnership”.
The part that makes it not fraud is that both parties do actually do the work.
And the part that would make it fraud (in some contexts, especially publicly traded and international corp struturing for tax purposes) would be overvaluing the services.
Tax laws may vary by jurisdiction. Often the in-kind contributions appear on a different line item from income on the balance sheet and usually go into a different box on the tax form.
SEC calls this round-tripping. ASC 606 requires commercial substance — if both parties just book offsetting transactions, auditors flag the net cash flow as zero
I remember in the couple years before the dot com crash in 2000, there was a lot of satire being written which was being taken very seriously. You couldn't tell what was serious and what was humor because both were absurd.
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[ 3.4 ms ] story [ 57.1 ms ] thread> We take 2% of every swap. Then we swap our revenue with another platform.
> Yet another hedge fund manager explained Icelandic banking to me this way: you have a dog, and I have a cat. We agree that each is worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners but Icelandic banks, with a billion dollars in new assets.
Read the whitepaper*
*there is no whitepaper
If you search for "vat carousel" today, it seems this is still a thing.
The result? The GDP goes up two million and we both have shit eating grins.
This is why substance over form is a thing in revenue accounting. Unless you're an American AI company ofc.
Can it also generate SOC2 certifications in days?
https://www.bloomberg.com/graphics/2026-ai-circular-deals
Let's just say if you really want to commit crimes, don't start with challenging the IRS. Just don't. There's so many horror stories about that.
Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping.
At big boy levels this is often structured as “strategic partnership”.
The part that makes it not fraud is that both parties do actually do the work.
Yeah, they’re getting useful things but they aren’t making money.