IBM's Kyndryl Accounting Fraud Explained and More Recently the Insiders Talk About Mass Layoffs
Recent days:
Kyndryl shadows the trajectory of IBM because it was created for and by the same people who run IBM.
Kyndryl's stock collapsed after it became rather obvious (not just to outsiders like us and Kyndryl insiders; shareholders too took not, then reacted) that something wasn't right and Kyndryl was cheating. This thread explained what had allegedly happened:
Okay, Here's what the Fraud Drama is AboutI think it's worth simplifying the story what is actually being investigated by the SEC. Basically, in March 2025 Gotham City Research accused Kyndryl and namely CEO & chairman Martin Schroeter of major issues surrounding cash flow. Firstly, it is important to note that Martin, as chairman, created a pay package for himself based mostly on the metric of free cash. Over 50% of his compensation is based on free cash. Since the report came out almost a year ago, Martin cannot claim ignorance.
So, what is free cash? Free cash is essentially the extra spending money a business has. So, they are free to use it as they please.
Now, the issues are that Kyndryl was sure doing a lot of gymnastics to inflate this number.
One allegation is that Kyndryl sold receivables to the bank and called that "revenue". Receivables are essentially IOUs for one-time payments. Kyndryl sold those to the bank and made it look like these loans are recurring revenue.
The allegations that the SEC are investigating also stem from the Gotham City report. This allegation says Kyndryl aggressively timed vendor payments to increase cash holdings and called that cash "free". This is like showing your spouse how much "spending money" you have in your bank account but failing to tell them you have that money because you missed your house payments. They have admitted to abnormalities in delaying vendor payments between quarters, which means they were punting expenses into away to call the cash to pay those expenses "free cash". That is clearly fraud.
Recently, Kyndryl, upon disclosing this information fired their CFO and general counsel, while claiming these two executives were not transparent with the CEO or the board. However, Kyndryl has decided NOT to let CEO Martin Schroeter lead any remediation plan, which will instead be led by the brand new interim CFO and interim general counsel. This is an obvious break showing they don't think shareholders trust Martin anymore.
Basically, if these allegations prove true, Martin will have to argue in court that he was an oblivious id--t instead of a criminal.
As one comment put it, they seem to have cooked the books like IBM does:
Many of us wondered how the books would be squared with the Kyndryl spin-off. Since at least the 2010s there has been “adjustment of revenue”. Oh we gave the customer product X for free when they bought product Y. Product Y being whatever senior management was claiming would be IBM’s newest wonder-product. The customer did not want product Y and never installed Y, they wanted X and installed and used X. Similarly when the customer wanted software services, the revenue would be booked as a sale of some product that had the highest commission structure (i.e cloud/analytics products) and the desired software services would be free. Again the software product was shelf-ware. When the behavior started we were all shocked, but then after years of the behavior it just becomes a running joke.
On "funny money":
It would be interesting to see an audit of "vendor payments". When GTS was part of IBM, there was a lot of "vendor payments" (to IBM) that were either concealed or treated as funny money...for example, charging periodic mainframe licensing fees to customers (and booking as revenue), but not really "paying them" because GTS was part of IBM. The books were cooked, so all anyone was doing was transferring numbers from one side of the ledger to the other.
But with the Kyndryl outsourcing, all those numbers became externalized. All of those "vendor payments" now have to be paid, on time, or else customer stuff stops working.
It's a mess.
Why this is deeply connected to IBM's practices:
Marty was CFO of IBM from January 1, 2014, to early 2018 and personally reported financial results to Wall Street for 12 quarters. He knows the drill.
https://newsroom.ibm.com/2021-01-07-IBM-Appoints-Martin-Schroeter-as-CEO-of-NewCo-Independent-Managed-Infrastructure-Services-Business-to-Spin-Out-from-IBM
There's lots more in there and it mostly makes sense. But remember that there is sanitisation/moderation/censorship going on: (same as in threads about IBM)
What remains is only the subset of the comments:
wow, business dev posts keep getting deleted regarding making women cry.
Can the forum admin kindly explain why they ve deleted last 5 posts in this thread here??? Were they threatened by KD or what?
Typical.
There is a more recent thread saying layoffs are coming next week:
Dark clouds are gatheringShortly before the FY2026 results will be announced on May 6th a global RA will hit all Northern European and north American teams. The scale of the RA will be unprecedented but is timed to address the disastrous financial results.
Fasten your seatbelts folks - this is the beginning of the end.
A more recent comment said:
This is very country specific, based on labour laws. I know someone from Americas who has been on the bench since mid-December, 5 months so far, and still there. Others, in some parts of Europe, were exited shortly after being notified - no bench. Guessing they are building up bench so they can 'streamline' sometime after results are posted in an effort to boost stock price and get the execs their bonuses - since they probably missed Q4 bonuses.
In case this page too gets gutted (censored) too we're making a visual copy below. Judging by how the media totally ignored 800+ layoffs at IBM's Confluent and 400+ layoffs at Red Hat a few weeks ago don't expect to hear anything about Kyndryl layoffs. █
