Sadly in most cases like these, the money's largely gone and very little is left to make any 'round' of investors whole (usually the latest round comes first).
A number of comments are asking why the investors do due diligence in checking the numbers.
Before Series A (i.e. seed, seed+, bridge), asking for audited financials is quite uncommon. The startup investment space largely works on trust, honesty, and speed. It also works on 'stamps of approval', previous ventures, accelerators (500, YC), investor networks (gain one, you gain a few others by association).
It's easy to say, they should always ask for diligence/auditing, but that slows things down in a space where speed to delivery means something. Less time you can spend on fundraising the better and even w/o diligence you can spend way too much time fundraising.
Not saying it's perfect, but it's the side of the double edge sword that's in play. If defrauding happens too much then enough bad eggs will have ruined the pot and audited financials will be required as a general practice.
A number of comments are asking why the investors do due diligence in checking the numbers.
Before Series A (i.e. seed, seed+, bridge), asking for audited financials is quite uncommon. The startup investment space largely works on trust, honesty, and speed. It also works on 'stamps of approval', previous ventures, accelerators (500, YC), investor networks (gain one, you gain a few others by association).
It's easy to say, they should always ask for diligence/auditing, but that slows things down in a space where speed to delivery means something. Less time you can spend on fundraising the better and even w/o diligence you can spend way too much time fundraising.
Not saying it's perfect, but it's the side of the double edge sword that's in play. If defrauding happens too much then enough bad eggs will have ruined the pot and audited financials will be required as a general practice.