Indian-American tech start-up founder pleads guilty to securities fraud

IANS

New York, April 29

A 47-year-old Indian-American has pleaded guilty to wire and securities fraud charges in connection with his scheme to dupe potential investors into supporting the technology start-up he founded and led.

Manish Lachwani, who founded Silicon Valley-based HeadSpin in 2015 and served as its CEO until May 2020, was arrested and charged in 2021 with defrauding investors by overstating the startup's revenue and other key financial metrics.

Between April 2017 and April 2020, HeadSpin -- that provided clients with software tools and access to devices to test mobile applications -- raised more than $100 million from investors over multiple rounds of fundraising, leading to a valuation of approximately $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.

He acknowledged that while HeadSpin was raising money, he provided to prospective investors information about the company's business, customers, revenue, and finances, a Department of Justice release stated.

Further, because HeadSpin was a software-as-a-service company, Lachwani knew that Annual Recurring Revenue (ARR) was significant to investors and their decisions whether to invest in HeadSpin.

According to the plea agreement, Lachwani admitted that he provided prospective investors with inflated ARR numbers and overstated revenue numbers. IANS