Lachwani faces one charge of wire fraud and one for securities fraud, and both charges carry a maximum penalty of 20 years
PRAVASISAMWAD.COM
An Indian-origin co-founder and former CEO of Headspin, a technology company, mobile app startup, Manish Lachwani, 45, has been arrested in the US and charged with defrauding investors to the tune of USD 80 million by overstating the startup’s revenue and other key financial metrics.
Manish Lachwani had made a name for himself when he developed the first operating system for Amazon’s tablet, the Kindle.
The charges against him, stemmed from his years of fundraising for his mobile app, starting November 1, 2019, 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 USD 100 million from investors.
Lachwani faces one charge of wire fraud and one for securities fraud, and both charges carry a maximum penalty of 20 years. A date for his first hearing had not been set.
Headspin’s cumulative revenues from inception through the first half of 2020 totalled only approximately USD 26.3 million, instead of the company’s USD 95.3 million originally reported
“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 USD 51 to USD 55 million,” a DOJ statement reads.
Lachwani also reportedly, on multiple occasions, instructed employees to “include revenue from potential customers that inquired but did not engage Headspin, from past customers who no longer did business with Headspin, and from existing customers whose business was far less than the reported revenue,” according to the complaint.
The company’s unaudited financial statements were reviewed by an auditing firm in May 2020.
According to the complaint, the review concluded that Headspin’s cumulative revenues from inception through the first half of 2020 totalled only approximately USD 26.3 million, instead of the company’s USD 95.3 million originally reported.
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