Former CEO of Headspin Manish Lachwani allegedly quadrupled the company’s overall revenue as the firm sought to close a series C funding round that valued it at $1.1 billion. Lachwani has been charged in in northern Calif. with wire and securities fraud.
The co-founder of a venture-backed Silicon Valley startup has been charged with significantly inflating the company’s revenue to convince investors to value the business at over $1 billion, prosecutors and the SEC said.
Lachwani was arrested Wednesday and has been charged in U.S. District Court in northern California with wire and securities fraud. He faces up to 20 years in prison and a $5.25 million fine, prosecutors said. He was also hit with a separate civil suit by the SEC. Lachwani co-founded the SaaS business in 2015 as a subscription service for customers to remotely test their mobile applications across different communications networks around the world. The company raised around $55 million in various funding rounds.
In May 2020, prosecutors say, the company’s books were reviewed by an outside auditor who discovered that the company’s cumulative revenue since it started business had only been $26.3 million, not the $95.3 million Lachwani had claimed. The auditor also found that Headpsin had lost $15.9 million since it was founded, rather than the $3.7 million profit Lachwani had said.
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