Indian American entrepreneur arrested for $80m fraud
Representational image (iStock)
AN Indian American former CEO of a technology company has been arrested in the US for defrauding investors to the tune of $80 million.
Manish Lachwani, 45, co-founder and former CEO of Headspin, was arrested on Wednesday (25) on charges of overstating the startup’s revenue and other key financial metrics, according to the Department of Justice (DoJ).
The federal complaint states that from 2015 to March 2020, Headspin, a mobile app testing platform, raised more than $100m from investors.
The charges stem from a period of fundraising starting no later than November 1, 2019, when Lachwani allegedly “reported false revenue and overstated key financial metrics of the company.
“Among other information, Lachwani provided investors false information that overstated Headspin”s annual recurring revenue (ARR) – a key metric for evaluating the success of companies that provide “software as a service” – by approximately $51 to $55m,” the statement further said.
According to the complaint, Lachwani had instructed employees to include revenue from potential customers that inquired but did not engage Headspin and from past customers who no longer did business with the company.
Besides, he also asked them to inflate the revenue from existing customers.
The company’s unaudited financial statements were reviewed by an auditing firm in May 2020.
The review concluded that Headspin”s cumulative revenues from inception through the first half of 2020 totalled only approximately $26.3m, instead of the $95.3m originally reported by the company, the complaint further said.
The review also calculated the cumulative net loss from Headspin’s inception through the first half of 2020, totalling approximately $15.9 million, instead of the $3.7m net income originally reported by the company.
Lachwani had developed the first operating system for Amazon’s tablet, the Kindle. He went on to help create Appurify, a mobile testing platform that Google bought in 2014, media reports said.
Currently, he faces one charge of wire fraud and one for securities fraud, and both charges carry a maximum penalty of 20 years.