Manish Lachwani, the Indian origin co-founder and former CEO of Silicon Valley technology company Headspin, was arrested today on charges of securities fraud and wire fraud perpetrated to raise money from investors. He was charged with inflating Headspin’s financial results to achieve high valuations that would attract investors.
The U.S. Securities and Exchange Commission said Manish Lachwani, 45, engaged in a fraudulent scheme that helped HeadSpin raise approximately $80 million from investors in Series B and Series C fundraising rounds between 2018 and 2020.
According to the federal complaint unsealed on Wednesday, Lachwani, of Santa Clara County, acted as its CEO of Headspin from its inception in 2015 until approximately May 2020. Headspin provides a remote service that allows customers to access mobile devices around the world and remotely test their applications across different communications networks and in different locations. Headspin earns revenue by selling subscriptions to its services.
Lachwani turned his company into a unicorn over the course of roughly five years and won the backing of investors including Tiger Global, GV, and ICONIQ Capital. But the Department of Justice on Wednesday alleged that the CEO overstated key financial metrics to boost the company’s valuation, inflating HeadSpin’s annual recurring revenue by $51 million to $55 million to investors, per the complaint. Authorities say the inflated metrics enabled Headspin to raise capital at inflated pricing that gave the California-based company over $1 billion valuation and to be considered a ‘unicorn’.
Lachwani has been charged with securities fraud and wire fraud and could face up to 20 years in prison. He will make an initial appearance in the federal court to face the charges in the complaint on date and time to be set by the court.
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