cuomo-canrock-150x150-3157481New York’s ongoing experiment in state-run venture capital investment appears—not for the first time—to have been ripped off.

During Governor Andrew Cuomo’s first term, seven VC outfits were given a total of $45 million in federal and private funds to invest in startups. One firm, Long Island-based Canrock Ventures, steered nearly all of the $1.67 million it received into companies it controlled and routed money back to its own coffers through fees and other gimmicks.

The Cuomo administration ignored concerns from a whistleblower investor, but a U.S. Treasury Department Inspector General investigation revealed $1.63 million in “gross misuse” of federal funds. In a report issued just before President Barack Obama left office, the IG recommended that the Department order New York State to repay the money. It’s not clear, however, whether the Department issued such an order—or, if it did, whether ESD ever recovered the money from Canrock.

The latest questionable use of taxpayer-backed venture funding in New York involves Tokenize, a Rochester tech startup.

Last year, as reported Sunday in the Daily News, Tokenize got $1.75 million from the New York State Innovation Capital Fund—a state-run venture capital fund seeded with $100 million in state funds to, as Governor Andrew Cuomo put it, help “budding entrepreneurs bring their ideas to market right here in the Empire State.”

Tokenize’s CEO, Melanie Shapiro, is accused of using the company as a “personal piggy bank,” the Daily News reports. From the newspaper:

Rochester techie Melanie Shapiro “egregiously misused corporate funds” for her company, Token, to buy groceries, booze, late-night Uber trips, clothes, flowers and even pay $25,000 in personal taxes, according to the suit filed in Delaware Chancery Court by board member Ken Seiff.

Digging further into details not mentioned in the newspaper story, the Tokenize investment was approved directly by Empire State Development, the state’s economic development agency, with minimal discussion at a December 2017 board meeting.

It’s also unclear what need the Cuomo administration is trying to fill in the VC space. New York venture capital firms reported at least $2 billion in fundraising each year since 2013, and took in $9.4 billion during 2018 alone.

Larry Summers, then President Barack Obama’s top economic adviser, in 2009 noted that government is a “crappy venture capitalist.”

The Cuomo administration is still trying, and failing, to prove him wrong.

You may also like

State Offers Taxpayer-Funded Health Coverage to Unionized Home Care Workers

In a new subsidy for the health-care union 1199 SEIU, the Hochul administration is allowing the union's benefit fund for home care aides to shift some members into taxpayer-funded health coverage through the Essential Plan. Read More

A Closer Look at $4 Billion in State Capital Grants to Health Providers

The state has awarded $4.3 billion in health-care capital grants over the past decade, with a disproportionate share flowing to upstate providers, Health Department records show. Th Read More

NY’s net taxpayer migration loss dropped a bit in 2021-22, latest IRS data show

The outflow of New York taxpayers to the rest of the country subsided from the previous year's record high during the second tax-filing period following the March 2020 COVID-19 outbreak, according to the latest (IRS). Read More

Hochul’s Pandemic Study Is a $4.3 Million Flop

The newly released study of New York's coronavirus pandemic response falls far short of what Governor Hochul promised – and the state urgently needs – in the aftermath of its worst natural disaster in modern history. Read More

NY’s biggest public pension fund gained nearly 12% in FY 2024

Rebounding from its biggest loss since the Global Financial Crisis, New York's Common Retirement Fund realized a strong investment gain of 11.55 percent in fiscal year 2024, state Comptroller Thomas DiNapoli announced. The Fund, which now stands just below $268 billion, supports pensions paid to members of the New York State and Local Retirement System (NYSLRS). Read More

82 Questions Hochul’s Pandemic Report Should Answer

This is the month when New Yorkers are due to finally receive an official report on the state's response to the Covid-19 pandemic, one of the deadliest disasters in state history. T Read More

The Real Lack of Courage Driving NYC Congestion Pricing

Governor Hochul is taking heat after postponing the state’s years-old plan to charge drivers to enter lower Manhattan. As critics slam her for lacking “political courage,” it’s an appropriate time to examine some of the underlying issues that congestion pricing was meant to indirectly mitigate—because many if not most advocates were afraid to touch those issues themselves. And if congestion pricing proponents are to be taken at their word about their concern for MTA finances, or traffic, or air quality, they must show some of the same courage they’ve accused the governor of lacking. Read More

To Encourage Recycling, Pols Move To Trash The Legislature

New York state lawmakers in recent years have surrendered some of their policymaking and taxing powers to the executive branch. With the 2024 legislative session coming to close, they’re poised to go even further and turn those powers over to an organization outside of government entirely. Read More