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862

Brainstorm more ways moxie might be fraud:

  • company didn’t give enough warning for shutting down, only a few weeks?
  • company mislead customers about their financial stability
  • they may have intended to try and get big quickly, and didn’t acknowledge that was risky
  • they might have intended to pump the value of company up and sell it
  • they weren’t in it for the long haul
  • they didn’t have a backup plan for if the company went bust that ensuresd the moxies were still usable
  • the product might not have actually been helpful for kids

assumptions

  • that any fraud/adversarial behaviour here would have to do with the fact that they suddenly ceased operations and couldn’t continue supporting the moxie

okay, where else might they be adversarial?

  • misleading people about whether moxie is intelligent
  • using tech buzz-words knowing that most people wont understand

okay, stuck on the brainstorm. I’ll move on to:

Here is the closing FAQ Closing FAQs – Moxie Robot

The closing FAQ doesn’t have info about this.

from Startup set to brick $800 kids robot is trying to open source it first - Ars Technica

Following customer backlash, Embodied is trying to create a way for the robots to live an open sourced second life.

Interesting. Didn’t know that. In that article there was a link to a linkedin post by Embodied’s founder:

Almost all comments are positive (I can only see like 10 comments without signing up for Linkedin though). Others are technical questions.

Something in the pdf in the owners announcement struck me as strange:

While our cloud services may become unavailable, a group of former technical team members from Embodied is working on a potential solution to allow Moxie to operate locally—without the need for ongoing cloud connectivity

They may become unavailable? They imply elsewhere that this is definitely going to happen.

Also, why are we told that it’s a group of former technical team members from Embodied? Why not just say “We have a team currently working on a solution?”. Sure maybe they don’t officially work for Embodied anymore? But still why bother mentioning it? Maybe they are former employees doing it for free because they think that’s the right thing to do and they want to help.

Speculation:
What if Embodied isn’t actually going under for the reasons they say (evidence: they’re keeping some technical team members working together) they’re just closing down Embodied for some other reason, like they want to stop servicing the Moxie robot (and maybe start working on another thing?) So maybe: They’re lying about having to discontinue Moxie, they’re actually deciding to. I think that’d be really bad. This is an interesting speculation I think.

What if they had this open software solution prepared in advance, waited for people to get upset that they were discontinuing moxie, and then came in and kind of saved the say with an alternative open solution?

Timing is interesting. They announced they were closing right the end of year. People are busy at the end of the year with Christmas and stuff. I wonder if less people would pay attention to the news they were shutting down because of the timing. Also I wonder people would buy them in the lead up to Xmas more.

I find it strange that they’re announcing they’re shutting down and that the service will be unavailable in a matter of days, and that they don’t know when it’ll be going offline. I don’t know how quickly businesses shut down though.

Questions I have:

  • when do companies usually shut down after running out of money?
  • what other companies is the founder involved in?

Some news articles pointed to this one: https://www.axios.com/2024/12/10/moxie-kids-robot-shuts-down

In it they say:

  • Company representatives did not respond to requests for more information.

I wonder what they asked and why they didn’t get a response. I suppose Embodied have have probably got a lot of people trying to get in touch with them.

This comment was from 2 days ago via reddit:

Yes I spent 800.00 on moxie for an Christmas present for my disabled grandson in November. I found out it doesn’t work so they basically ripped my off. That’s fraud… I’m disabled myself with MS and live on a very fixed income… I’m so mad at them for doing this to me and my grandson… Signed very mad grandma…

Apparently, they were selling Moxies right up until recently? That sucks. I think they would be obliged to refund purchases within at least the warranty period. This person bought one in November, as a gift, which wasn’t given until xmas, which was after they announced they were stopping support. They call it fraud. I think they’re clearly entitled a refund there. Afaik, the company is offering no refunds at all.

actually Embodied’s closing FAQ says:

Due to Embodied’s financial situation and impending dissolution, we regret that we are unable to offer refunds for Moxie purchases.

However, we understand that some of you may have recently purchased Moxie, including as a holiday gift. While we cannot make any guarantees, if the company or its assets are sold, we will do our best to prioritize refunds for purchases made within the last 30 days. We know this situation is especially difficult for families, and we deeply regret any inconvenience or disappointment this may cause.

Well, hopefully that actually happens, but even then, what about people that bought them 60 days ago? That sucks.

so, more to add to the brainstorm:

  • company might be lying about losing funding, and be shutting the company down to discontinue moxie
  • they were selling moxies up until very recently, and some people will have bought them for xmas in the last few months, and waited to gift them till xmas. So these people have gotten zero use from them.
863

This is a bit chaotic sorry

864

Suppose Embodied knew several months ago that they might shut down. Then they hid that from customers and kept selling robots. They stopped producing new robots and used large discounts to sell off the robots that had already been produced. Then they shut down abruptly and breached their 30-day refund contract with people (as well as, with a little more room for debate, their warranty contract – people reasonably expect warranty service to keep the robot working). Right up until the end, they also kept selling extended warranties that people paid extra for.

Does that sound like plausibly what happened? And what would you make of that if it did happen?

865

Okay sure. I will need to brush up on this topic first.

I’m expecting that part of your position has to do with the role banks play in inflation?

866

That all sounds very plausible.

I would consider that really bad. They would seem to have anticipated their lack of funding enough to stop production, but didn’t care that they were selling inventory whose use depended on that same funding. They’d be selling products that they basically expected to not be usable. They expected that enough to halt production.

867

ok and would that be illegal in an ideal free market? what specific laws would be being broken and how/why, if any? (if you need to add a few more reasonable, plausible factual assumptions/speculations to reach decisive conclusions about some laws being broken, go ahead and add them)

868

I think it’s a breach of contract. Customers have returns policy contracts, and warranty contracts that have been broken. Embodied presumably aren’t honouring the vast majority of those.

Is it also fraud? I think so if Embodied knowingly sold stock for which they couldn’t uphold contracts. That seems to me to be fraud.

869

What if they sold robots which they thought they had a 90% chance not to be able to uphold contracts for? 50%?

870

90% is a big, reckless gamble, that you should expect to lose. So I think yes.

50% is a coin toss. I think that’s too reckless too. So I think yes.

871

So one of the questions is why can’t they refund purchases from the last 30 days? Where did that money go?

Being unable to refund recent purchases doesn’t just happen by itself.

872

Perhaps they had become insolvent so all the money went to their creditors. I found mention in a couple of articles regarding this event of the terms ‘insolvent’ and ‘bankrupt’. That might explain why they didn’t start another round of production (couldn’t afford it, and couldn’t get credit.), and why they weren’t able to secure more funding.

There are details that I don’t fully understand, but I think trading whilst insolvent is really problematic legally. From https://www.lawyer-monthly.com/2023/10/trading-while-insolvent-what-are-the-legal-consequences-directors-can-face/:

Once a company director knows – or ought to know – that their company is insolvent, they have a legal duty to place the interests of the company’s creditors above those of themselves and any fellow directors or shareholders. In practical terms this means not taking any additional credit you know you are unlikely to be able to repay, nor should a company accept customer deposits for goods or services the company is unlikely to be able to fulfil.

By continuing to sell their products they were incurring more financial responsibilities, like contracts to provide refunds. That’s not exactly credit though.

873

So, in general, when companies run out of money, there is a priority order for who gets paid first. Do you know what the order is or can you find out what it is?

874

No I don’t know but I’ll have a look.

875

Okay so, broadly, the answer I found was:

  1. Liquidation costs
  2. The secured creditors, whose credit is secured against company assets
  3. unsecured creditors
  4. shareholders

Within each of these there are further priority divisions.

876

What about customers and employees?

877

Afaik, customers and employees are unsecured creditors.

From investopedia:

Unsecured creditors are divided between preferred and non-preferred, as certain unclaimed creditors like employees and tax agencies are given priority.

And for customers, I found this:

On liquidation, any customer wishing to use a current guarantee or warranty for one of your products effectively becomes an unsecured creditor, and must take their place in the creditor hierarchy.

878

So can you imagine some plausible scenarios where people are paid out of order?

879

Hmm well customers are normally almost last anyway, but they are before shareholders who are dead last.

Maybe if the shareholders anticipated that they’d go bust, and ran the company in a way that moved funds towards themselves in the lead up to liquidation. That would effectively have them paid earlier than customers. So basically, they’d be running the company dry so there was little left over upon liquidation. I don’t know exactly how this might be done though.

Once the process of liquidation had started though I don’t think they could influence the order, because the liquidators are in charge of that and a are third party.

Brainstorm of others:

  • Embodied also sold a monthly subscription service for the Moxie for people who bought them second hand. Maybe they could use loopholes to consider all their customers subscribers, and so not entitled to warranty claims (?)
  • Liquidators are corrupt/have conflicts of interest (maybe they invested in the company)
  • Maybe if employees were paid partly in shares then they wouldn’t be legally considered employees but shareholders and so wouldn’t get paid in the unsecured creditors round (?)
  • Maybe some shareholders have claims as creditors?
880

What do you think Embodied may have been spending money on, in the last few months? E.g. money comes in adequate to cover 30-day returns, and then where does it go?

881

Not production. Overhead? Staff? Debt?

Assuming they were due for another funding round, maybe it was allocated to some part of their balance sheet so that their business looked like it performed better to potential investors?

I’m not so sure here.