Manish Lachhwani faces two charges – both charges carry a maximum sentence of 20 years. (Representative)
Washington:
The Indian-origin former CEO of a technology company has been arrested in the US and charged with defrauding investors of USD 80 million by inflating the startup’s revenue and other key financial metrics.
According to the Department of Justice (DOJ), Manish Lachhwani, 45, the co-founder and former CEO of Headspin, was arrested on Wednesday on charges of fundraising for his mobile app.
The federal complaint states that from 2015 to March 2020, Headspin, a mobile app testing platform, raised more than $100 million from investors.
The allegations stem from a period of fundraising that began after November 1, 2019, when Lachwani allegedly “incorrectly reported revenue and inflated the company’s key financial metrics.”
“Among other information, Lachvani provided false information to investors, which determined Headspin’s annual recurring revenue (ARR) – a key metric for evaluating the success of companies that provide “software as a service” – about 51 US dollars. USD 55 million,” reads a DOJ statement.
Lachwani reportedly directed employees, on several occasions, to include “revenue from potential customers who did not do business with Headspin, from previous customers who did business with Headspin, and from existing customers whose business exceeds reported revenue.” Was low, didn’t involve headspin.” 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 revenue from the beginning to the first half of 2020 was only around USD 26.3 million, instead of USD 95.3 million originally reported by the company.
The review calculated the cumulative net loss from the inception of Headspin during the first half of 2020 to be approximately USD 15.9 million instead of the net income of USD 3.7 million originally reported by the company.
Prior to co-founding Headspin, Lachwani made a name for himself when he developed the first operating system for Amazon’s tablet, the Kindle. cbslocal.com reports that he helped build Appurify, a mobile testing platform that was purchased by Google in 2014.
Lachwani faces another charge of wire fraud and one of securities fraud, and both charges carry a maximum fine of 20 years. A date for his first hearing had not been set.
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