A 47-year-old Indian-origin former CEO of a Silicon Valley technology company pleaded guilty to securities fraud for overstating revenue to investors, according to the Attorney's Office in the US state of California.
Manish Lachwani, the former CEO and founder of a tech start-up, HeadSpin, pleaded guilty in San Francisco federal court on Thursday to two counts of wire fraud and one count of securities fraud charges for his scheme to dupe potential investors into supporting his company, according to a press release by the US Attorney's Office.
Lachwani was arrested in August 2021 and charged with defrauding investors to the tune of USD 80 million by overstating the start-up's revenue and other key financial metrics.
He founded HeadSpin in 2015 and served as its Chief Executive Officer until May 2020. The company provided clients with software tools and access to devices to test mobile applications, the press release said.
Between April 2017 and April 2020, HeadSpin raised more than USD 100 million from investors over multiple rounds of fundraising, leading to a valuation of approximately USD 1.1 billion. According to his plea agreement, Lachwani admitted that he disseminated false and overstated revenue metrics to potential investors to lure investments into his company.
Lachwani acknowledged that while the company was raising money, he provided prospective investors with information about the company’s business, customers, revenue, and finances, the press release said.
He also admitted to providing the investors with overstated revenue and inflated annual recurring revenue numbers, which are significant to investors and their decisions on whether to invest in the start-up.
According to the press release, both the wire and securities fraud charges carry maximum penalties of 20 years in prison and fines up to USD 250,000 and USD 5 million, respectively.
In addition, as part of the sentence, Lachwani may be ordered to pay additional fines and to serve an additional term of supervised release after any prison sentence.
Lachwani is currently released on bond, the press release said.
US District Judge Breyer has scheduled Lachwani’s sentencing hearing for September 27, 2023, it added.
Before he co-founded Headspin, Lachwani made a name for himself when he 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, cbslocal.com reported.
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