Today, both the US Department of Justice and the Securities and Exchange Commission accused Manish Lachhwani, co-founder of a mobile app testing company, Headspin, of fraud. The SEC says it violated the provisions of the Fraud Act and that the civil penalties it seeks include a permanent restraining order, a restraining order based on conduct and an officer and director of the Lachhwani Bar.
The DOJ, who in fact arrested Lakhwani today, has accused him of a count of wire fraud and a count of securities fraud, and if found guilty, Relevant punishments are more severe, including wire fraud, with a maximum sentence of 20 years in prison and a 250,000 fine. If found guilty of securities fraud, he faces up to 20 years in prison and a 500,000 fine. Face
Both the SEC and the DOJ say Lakhwani, who led the six-year-old company as CEO until May last year, deceived investors by falsely claiming 80 80 million to head his company. Spin has made strong and steady progress. Gaining customers and generating revenue “as he led his Series C round to potential supporters.
According to the SEC, its apparent brilliance was largely an attempt to secure the round at the expense of the so-called unicorn. This apparent plan worked, too. Head spin, based on the Palo Alto, provided کمپنی 60 million in سی 1.16 billion in Series C funding to Dell Technologies Capital, Iconic Capital and Tiger Global at Forbes in February last year. Forbes reported at the time that investors had doubled the price assigned to the headspin when its Series B round closed in October 2018.
The SEC also said that Lakhwani was trying to make himself rich, saying that he did so by selling 2.5 2.5 million of his head-spin shares in a fundraising round during which he Misrepresented an existing headspin investor. ” (It is not clear from his complaint whether the SEC is referring to Series C or earlier.)
The DOJ’s federal complaint reveals that Lakhwani’s alleged scheme dates back to at least November 2019, when the company was raising funds. According to the DOJ, Headspin’s success چھ six-year-old Palo Alto, CA, a startup that helps apps and devices work in a variety of environments around the world غلط is deliberately misleading investors through writing. Presented in style.
Specifically, the complaint alleges that “in content and presentations for potential investors, Lakhwani reported incorrect earnings and promoted the company’s critical financial metrics … he was involved in operations, sales and records, including invoicing.” Capping maintained control, and he was to make the final decision on what revenue book and what was included in the company’s financial records.
It says the FBI discovered “several examples” in its investigation, instructing employees to include income from potential customers who made inquiries but did not include head spin, from former customers who Heads did not do business with Spin anymore, and from existing customers whose business was much lower than reported income.
Among other things, Lakhwani provided misinformation to investors, which boosted Headspin’s recurring annual revenue. . . About $ 51 million to $ 55 million, “says DOJ.
According to the complaint, the company’s board of directors conducted an internal investigation which revealed significant problems in reporting headspin customer deals and reduced the value of headspin from $ 1.1 billion to $ 300 million. Yogurt revealed.
In fact, in August last year, Information reported that “financial irregularities were compelled after an internal review. [Headspin] To revive its finances, the company plans to reduce the price of its Series C stock by about 80 percent.
The outlet then reported that Lakhwani had been replaced by another executive. According to LinkedIn, the man is Rajiv Botani, who joined Headspin as its chief sales officer when the Series C round was announced in February last year.
The Information said Nakish Arora, former president of Softbank, current CEO and chairman of Palo Alto Networks, and a former board member of Headspin, assisted in the internal review.
The SEC is investigating, he said. The DOJ, meanwhile, noted in its statement that “a complaint merely alleges that crimes have been committed, and all defendants are acquitted as long as they are proved beyond a reasonable doubt.” Don’t be. “
Either way, the approach doesn’t look very promising right now for Lakhwani, who, according to Forbes, previously sold a mobile cloud business to Google and Yahoo co-founder Jerry Yang after introducing Brian Colewell. Co-founder Head Spin was injured. Polantier and Cora Engineer were working on different startups at the time.
Colewell lives as a CTO with Head Spin. His name has not been mentioned in the SEC or DOJ complaints regarding head spin.
The company itself, which is allegedly cooperating with the government’s investigation, has not been charged.
Pictured above, left to right, head spin founders Likwani and Colewell.