Ex-CEO of Silicon Valley mobile app startup HeadSpin charged with fraud By Reuters

© Reuters. Signage is seen at the United States Department of Justice headquarters in Washington, D.C., U.S., August 29, 2020. REUTERS/Andrew Kelly

By Jonathan Stempel and Chris Prentice

(Reuters) – U.S. authorities on Wednesday charged a co-founder and former chief executive of HeadSpin with defrauding investors out of as much as $80 million by overstating the Silicon Valley startup’s revenue and other key financial metrics.

Manish Lachwani was accused of lying to HeadSpin investors from 2018 to early 2020 about the ability of his privately-held provider of mobile app testing services to attract and retain business, including from major Silicon Valley companies.

The U.S. Department of Justice said Lachwani’s misconduct included directing employees to count revenue from prospective customers who never bought anything and former customers who had taken their business elsewhere.

Authorities said the inflated metrics enabled HeadSpin to sell preferred shares at inflated prices in two funding rounds that gave the Palo Alto, California-based company a $1.1 billion valuation, large enough to be considered a “unicorn.”

Lachwani, 45, of Los Altos, California, was criminally charged with securities fraud and wire fraud, and faces up to 20 years in prison on each count. The U.S. Securities and Exchange Commission filed related civil charges.

A lawyer for Lachwani could not immediately be reached for comment.

Founded in 2015, HeadSpin was not charged. The company said it has cooperated with the government’s investigation and will continue doing so.

After discovering the inflated revenue, HeadSpin forced Lachwani to resign in May 2020 and reduced its valuation to about $300 million, court papers show.

It also returned 70% of principal to investors who bought the Series B and Series C preferred shares, the papers showed. Some investors kept their shares.

“Companies and their executives must tell the truth when speaking about financial metrics that are material to the value of the business,” Monique Winkler, associate regional director in the SEC’s San Francisco office, said in a statement.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

{n.callMethod? n.callMethod.apply(n,arguments):n.queue.push(arguments)};
s.parentNode.insertBefore(t,s)}(window, document,’script’,
fbq(‘init’, ‘751110881643258’);
fbq(‘track’, ‘PageView’);

by : Reuters

Source link

Capital Media

Read Previous

Oil up 3rd Straight Day After Outsized U.S. Draws By Investing.com

Read Next

MTN a jusqu’au 30 novembre pour améliorer la qualité de ses services et éviter des sanctions du régulateur