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