[Summary]
From 2025 to 2026, large-scale issues surrounding inappropriate accounting, fictitious circular transactions, and discrepancies with reality have surfaced one after another in fields supported by intangible assets and future expectations, such as AI, SaaS, medical IT, and advertising agency businesses.
Typical examples include the falsification of financial statements by AI-related company Alt, the suspected fraud case involving medical IT startup MTU, and the fictitious circular transaction issue in the advertising agency business of KDDI subsidiary Biglobe and G-Plan.
These are separate incidents. However, from the point of view of investment practice, it shows a common weakness in the age of intangible assets: ``growth expectations, ARR, brand credibility, and M&A stories tend to be evaluated before actual demand.'' In this article, we will conveniently refer to this structure as "cyclical trading 2.0" and outline the danger signs that investors should be aware of.
First, the conclusion
What will be important in future investments and M&A is reality, not growth stories.
There are three things to check:
Key point
Key point
Key pointIn areas such as AI, SaaS, medical DX, advertising, and data businesses, the center of business is not factories or inventory, but code, logs, data, KPIs, contracts, and future expectations.
Therefore, even if it appears to be growing on paper, it is necessary to separately check whether the actual demand, usage status, and cash flow are supporting it.
| Incidents/Issues | Main issues | Things investors should look at |
|---|---|---|
| Alts | AI/SaaS sales, circular trading, trust in the listed market | Sales and cash, ARR quality, customer usage status |
| MTU | Existence of medical IT business, PE acquisition DD | Customers, sales, product production |
| KDDI subsidiary | Fictitious circular transactions in advertising agency business, subsidiary management | Existence of transactions, deposits and withdrawals, internal control |
Why “Circular Trading 2.0”?
Traditional circular trading has been understood as a structure in which multiple companies circulate orders and inflate sales.
It typically takes the form:
AKey point→ BKey point
BKey point→ CKey point
CKey point→ AKey pointIn this case, sales may appear to be increasing, but there is no actual demand and cash is unlikely to remain.
Modern problems, on the other hand, are a little more complex.
It's not just an increase in sales, but a combination of AI, SaaS, media exposure, brand trust, PE acquisitions, IPO expectations, ARR growth rate, etc., and future expectations themselves become the ability to raise funds.
expectations
↓
rise
↓
capital inflows
↓
Key point
↓
Key pointIn this way, it is modern in that not only accounting cycles but also expectations, evaluations, funding, and PR cycles.
What has changed in the intangible asset economy?
In the past, corporate value was largely supported by tangible assets such as factories, equipment, inventory, real estate, and stores.
However, in today's high-growth companies, the center of value has shifted to intangible assets such as:
- Source code
- AI model
- data -ARR -MAU -PoC
- Brand
- network effect
- Customer base
- Algorithm
Although these are important assets, the problem is that it is difficult to confirm their existence and quality from the outside.
| Tangible asset type | Intangible asset type |
|---|---|
| Can see factories, equipment, and inventory | Check codes, logs, and data |
| On-site investigation is effective | Technical DD is required |
| Easy to compare sales and actual products | Need to see the difference between KPI and actual usage |
| Easy to compare asset values | Easy to incorporate future expectations into evaluation |
Intangible assets are the competitive edge of growing companies.
But at the same time, it can also be easier to “appear to exist” than tangible assets.
An era where expectations are priced first
In the 2020s market, themes such as AI, SaaS, DX, medical IT, and cybersecurity are likely to be highly evaluated.
In these areas, future market size and growth rates are more important than short-term profits.
As a result, explanations such as the following become more acceptable:
-Currently in the red, but making upfront investments
- PoC is spreading
- ARR is growing
- Go for the customer base first
- High profit margin in the future
For some companies, this explanation is true.
The problem is that deficits, deterioration of operating CF, increase in accounts receivable, and low actual utilization can all be explained as ``because it is a growth investment.''
Investors need to separate the growth story from actual demand.
Alt-type AI expectations and ARR performance
The Orts incident has highlighted a strong warning sign when looking at AI/SaaS companies.
The company had been developing an AI meeting minutes service, but with the publication of the third-party committee report and subsequent criminal case reporting, over-reporting of sales and circular transactions became major issues.
TV Asahi NEWS reports that at the first trial in March 2026, Orts as a corporation and its former executives admitted to the charges that they posted fictitious sales totaling over 11.1 billion yen from 2022 to 2024 and submitted false securities reports.
AI/SaaS companies focus on metrics such as:
-ARR
- Number of paid accounts
- Number of companies using
- Retention rate
- Number of PoCs
- Case studies
These are primarily useful for looking at business growth.
However, without actual usage, actual billing, and cash collection, the metrics will take on a life of their own.
| Appearance of growth | Facts to check |
|---|---|
| Increase ARR | Continuous charges or temporary transactions |
| Increase in number of accounts | Is it actually being used |
| Sales increase | Are funds being deposited |
| Many PoC | Are they converting to paid contracts |
In the AI boom, it is necessary to separate the future potential of technology from the accounting quality of sales.
MTU type PE/Medical DX/Existence confirmation
In the MTU case, the themes of medical IT, AI, cybersecurity, and PE acquisitions overlapped.
According to reports, the former MTU representative was arrested on suspicion of making false statements regarding business performance, sales, and the track record of introduction to medical institutions. On the other hand, it has been reported that the former representative denies the charges, and the charges are still in the suspicion stage at this point.
The questions this incident poses to investment practice are very clear.
Key point
Key point
Key pointPE funds typically perform DD on finance, legal, business, tax, etc.
However, in intangible assets-based businesses such as AI, medical DX, and SaaS, in addition to traditional DD, it is also necessary to check usage logs, API communications, the production environment, and customer usage status.
| Conventional confirmation | Additional confirmation required |
|---|---|
| Sales ledger | Bank deposits, tax payments, and customer payment records |
| Customer list | Independent confirmation without going through the target company |
| Demo screen | Production environment, logs, communication results |
| KPI materials | Active usage, cancellation rate, actual billing |
The MTU case is a case that demonstrated the importance of "substantive DD" in PE acquisitions.
KDDI subsidiary brand brand trust and subsidiary management
The KDDI subsidiary issue demonstrated the difficulty of brand trust and subsidiary management.
On March 31, 2026, KDDI announced that it was necessary to cancel sales, cost of goods sold, etc. and make retroactive adjustments to the past years, as it was discovered that non-substantive fictitious circular transactions had been conducted in the advertising agency business of its consolidated subsidiary Biglobe and its subsidiary G-Plan from previous years.
The results of the special investigation show that approximately 99.7% of G-PLAN and BIGLOBE's advertising agency business sales were recorded as fictitious circulation transactions, that the corrected sales amounted to a total of 246.1 billion yen, and the amount outflowed to external parties was 32.9 billion yen.
At the same time, it is also explained that the organizational involvement of KDDI, BIGLOBE, and G-PLAN has not been confirmed.
The important point of this problem is that even in large corporate groups, it is difficult to verify the actual status of new businesses or non-specialist businesses of subsidiaries.
| If you have brand trust | Blind spots that can occur |
|---|---|
| Peace of mind because it's a large corporate group | Difficult to see subsidiary sites |
| Sales scale is large | Look only at transaction volume rather than actual demand |
| There are multiple business partners | Verification of the existence of upstream and downstream parties becomes weak |
| There is internal control | Overlooking the concentration of work on specific individuals |
In KDDI's disclosure, measures to prevent recurrence include management of business partners, separation of authority in purchasing operations, acceptance inspection operations, risk management of new businesses, and financial management of group financing partners.
This shows that modern circular transaction risk is not only an issue of accounting, but also of subsidiary management, cash flow management, and segregation of duties.
Common Danger Signals
Looking across the three cases, the danger signals can be broadly divided into three types.
Financial aspects
| Sign | Notes |
|---|---|
| Sales are rapidly increasing but operating CF is weak | Sales may not be converted into cash |
| Accounts receivable has increased rapidly | Confirmation of uncollectible and fictitious sales is required |
| There are many transactions with affiliated companies and agencies | It becomes difficult to confirm circular transactions and actual demand |
| Dependence on capital increase/borrowing | Funds needed to maintain growth story |
| Rapid increase in goodwill | Risks of dependence on high-priced acquisitions and M&A |
| Emphasis only on EBITDA | Need to check profit quality and cash generation ability |
IR/Explanation
You should also be wary of companies that use a lot of abstract language.
- A.I.
- revolution
- World's first
- National project
- Web3
- next generation
- Unique ecosystem
These words are not bad in themselves.
However, if the customer, contract, deposit, usage status, cancellation rate, and profit rate are not shown, it is a weak basis for investment decisions.
Market aspect
Stock price and market frenzy can also slow reality-checking.
- Even in the red, market capitalization leads
- Excessive excitement on SNS
- Volume increases rapidly
- Repeatedly raise funds in a short period of time
- Many affiliated releases
The more excited the market gets, the more investors feel they don't want to miss out.
That mentality weakens calm due diligence.
Why is it so difficult even for professionals to spot?
The reason why it is difficult for even professional investors to spot them is because of their specialization and competitive mentality.
With AI and SaaS, you need to see not only sales and contracts, but also code, logs, API communication, DB access, and usage history.
However, time is limited when it comes to investment projects.
Furthermore, in popular areas, FOMO, which prevents competing funds from taking over, also comes into play.
| Reasons why it is difficult to see through | Contents |
|---|---|
| Technical expertise | Expertise is required to check the production operation of AI and SaaS |
| Data private | Usage logs and customer data are difficult to see from outside |
| Competitive environment | DD time tends to be shorter for more promising projects |
| Growth explanation | Deficit and deterioration of operating CF can be explained as upfront investment |
| Brand trust | Large companies, prominent investors, and media exposure create a sense of security |
If there are things that even professionals can't spot, individual investors need to be even more cautious.
The concept of zero trust DD
In DD in the age of intangible assets, it is not enough to simply assume that the submitted materials are basically correct.
What is important is an idea close to zero trust.
In other words, rather than relying on contracts, screens, KPIs, customer lists, and invoices as they are, confirm the reality through another route.
Technical DD
Technical confirmation is essential for AI/SaaS companies.
| Items to check | What to see |
|---|---|
| Git log | Development history, commit distribution, is it a hastily created product |
| Production log | API communication, DB access, user usage status |
| Cloud costs | Do sales scale and server usage match? |
| Live demonstration | Can you handle actual operations and minor changes on the spot |
| Security | Permission management, vulnerabilities, and audit logs |
For example, if your SaaS has annual sales of several billion yen, but cloud usage and API communication are extremely low, additional checks are required.
Forensic DD
Forensic verification is important in financial and transactional aspects.
| Items to check | What to see |
|---|---|
| Bank account confirmation | Check actual deposit history, not PDF |
| Independent customer confirmation | Confirmation with the customer without going through the target company |
| Business partner investigation | Confirm same address, relatives, former employees, related parties |
| Tax payment/invoice reconciliation | Alignment of sales, invoices, deposits, and tax materials |
| Anti-social and fraud investigation | Confirmation of surrounding areas of business partners and management |
What is important is that the information provided by the company is not enough.
Sales, customers, and products need to be viewed independently.
The essence is not only fraud
The difficult thing about modern-day problems is that there are cases where the fraudulent intent was not always clear from the beginning.
When a business does not grow as expected, resulting in deficits or poor cash flow, it can still cross the line as it tries to maintain the expectations of the market and investors.
expectationsKey point
↓
capital inflows
↓
Key point
↓
expectationsKey point
↓
Key point
↓
Key pointThis is not just an individual fraud, but also a structural problem that combines the AI bubble, excess startup capital, growth supremacy after low interest rates, and the brand trust economy.
However, just because it is a structural issue does not mean that the responsibility is diminished.
Rigorous fact-based verification is essential from the perspectives of investor protection, market trust, and internal controls.
Action points for investors
Investors can easily avoid risky deals simply by asking the following questions.
| Question | Materials to see |
|---|---|
| Are sales really converted into cash? | Operating CF, accounts receivable, and payment cycle |
| Are customers actually using it? | Churn rate, usage logs, implementation examples |
| Is there any bias among business partners? | Major customers, agents, and related parties |
| Isn't it explained only in theme words? | Products, prices, contracts, profit margins |
| Does the company rely on acquisitions or capital increases? | Goodwill, debt, and dilution |
| Is the product in production? | Technical DD, logs, cloud costs |
What will become important in the future is not companies that can talk about growth, but companies that can prove their existence.
Summary
The Orts, MTU, and KDDI subsidiary issues are cases with different characteristics.
However, what they have in common is that they represent risks in an era where intangible assets, future expectations, brand trust, KPIs, and growth stories tend to be evaluated before actual demand and cash flow.
In traditional investment decisions, sales growth, ARR, implementation history, partnerships, and media exposure seemed to be strong factors.
Now, in addition to that, you need to verify the reality of your customers, products, sales, cash, and data.
In the capital market in the age of intangible assets, the important thing is not "what to believe" but "what you can confirm."
The market is moving from an era of growth to an era of reality.
Source
- Alt “About the indictment of our company and former executives” (October 29, 2025): https://www.alt.ai/20251029
- Alts "Notice regarding implementation of 100% capital reduction, etc." (March 31, 2026): https://contents.xj-storage.jp/xcontents/AS82078/348f73ee/ea24/4324/a885/d4c85c892f3e/20260401090855244s.pdf
- TV Asahi NEWS "'Alts' financial falsification case: former executives admit charges at first trial": https://news.tv-asahi.co.jp/news_society/articles/000490373.html
- TBS NEWS DIG "The former president of a medical startup (38) was arrested on suspicion of fraud after defrauding a fund company of over 1.6 billion yen on the pretext of selling the company after lying about ``sales of about 800 million yen.'': https://newsdig.tbs.co.jp/articles/-/2657125?display=1
- FNN Prime Online "Former president of a medical startup arrested on suspicion of defrauding an investment fund of approximately 1.6 billion yen after offering to take over the company, saying it had annual sales of 800 million yen": https://www.fnn.jp/articles/-/1043917
- KDDI “Regarding the findings of the investigation by the Special Investigation Committee” (March 31, 2026): https://newsroom.kddi.com/ir-news/assets/2026/kddi_ir-1110_4385/kddi_260331_main_01_onEXBW.pdf
- KDDI "Notice regarding submission of revised report of past year's internal control report and important deficiencies to be disclosed" (March 31, 2026): https://newsroom.kddi.com/ir-news/assets/2026/kddi_ir-1111_4400/kddi_ir-1111_4400_pdf_D.pdf