SoftBank is looking to its employees, including Chief Executive Masayoshi Son, for cash as the firm rushes to raise an ambitious technology fund amid volatile markets.

CNBC reported that the Japanese company plans to lend up to $20 billion to its employees to buy stakes in its second giant venture-capital fund. Mr. Son may account for as much as $15 billion of that amount, according to sources.

At $20 billion, the employee pool would represent nearly a fifth of the money that SoftBank said in July it had lined up for its second Vision Fund, a successor to a $100 billion fund that launched in 2017 and is nearly spent.

This bizarre financial scheme raises a number of questions:

We Work will require additional funding which could effect its “$47 billion valuation.” Therein lies the fallacy of determining the “value” of profitless ventures by simply relying on VC funding and resulting equity ownership. When you adjust for the burn rate the math changes rather materially. Put another way, who would write a $47 billion cash check for a 100% stake in We Work with no intention to IPO it (which is to say, sell)?

Softbank records the asset twice. First as a loan to the employee. Second as the fund balance. Which auditor is signing off on this?

If an investment bank kicks in money to SoftBank’s fund to prop up WeWork (or any other struggling startup), they get a piece of the IPO action. Is this not essentially a pay-to-play scheme?

What are the cash on cash returns to investors in Vision Fund 1? If it has not generated a return, why invest in Fund 2 now? This company is riddled with conflicts of interest and sketchy accounting for unrealized gains and leverage.

Where from is SoftBank giving loans to its employees? From its internal accruals or from the fund receipts? Is giving its employees loans at 5% the best use of those funds?

There are many features of SoftBank’s recent activities that are reminiscent of Kaupthing/Lehman/DB/Enron. Too many “clever” structures and too many theoretical billions that they mark to market themselves. Is this time really different?

In Enron’s case, the company would build an asset, such as a power plant, and immediately claim the projected profit on its books, even though the company had not made one dime from the asset. If the revenue from the power plant was less than the projected amount, instead of taking the loss, the company would then transfer the asset to an off-the-books corporation where the loss would go unreported. This type of accounting enabled Enron to write off unprofitable activities without hurting its bottom line.

Even if SoftBank is not the next Enron — why resort to atypical financial engineering? It will likely make some percent of their potential investors reconsider.

I’ve invested in a lot of private equity deals, both through funds and by directly purchasing private shares. Something about this “plan” does not pass the smell test.

My first thought after reading this was essentially — wow, think of the advisory fees on the way up and the (potential) restructuring and insolvency fees on the way down. Investment banks and financial institutions have every incentive to assist in what could potentially be fraud. Especially when the numbers are so big — they will win no matter what.