Lachwani’s 18-Month Prison Sentence Handed Down for Wire Fraud, Securities Scam

SAN FRANCISCO – In a crushing blow to the Silicon Valley tech scene, Manish Lachwani, the 47-year-old founder of software-as-a-service (SaaS) company HeadSpin, was sentenced to 18 months in prison for his brazen wire and securities fraud scheme.

Lachwani, a resident of Los Altos, California, pleaded guilty on April 23, 2023, to two counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. § 240.10b-5. He had been charged in a superseding indictment in August 2022 with wire fraud, securities fraud, and money laundering.

According to court documents, Lachwani founded HeadSpin in 2015 and served as its Chief Executive Officer until May 2020. The company provided clients with software tools and access to remote devices to test mobile applications. Between April 2017 and April 2020, HeadSpin raised over $100 million from investors, but Lachwani’s deceitful tactics ultimately led to his downfall.

Lachwani admitted to providing potential investors with false information about the company’s business, customers, revenue, and finances, which was used to secure funding. He knowingly overstated HeadSpin’s revenue and annual recurring revenue (ARR), a measure of a company’s subscription revenue rate at a particular point in time, annualized to show revenue the company would expect to make over the course of a full year.

“This defendant admitted he lied about his company’s revenue and customers to attract funding from investors, including many in Silicon Valley,” said United States Attorney Ismail J. Ramsey. “Today’s sentencing should send a message to other entrepreneurs who may be tempted to cross the line into fraud and to ‘fake it until they make it.’ This Office is committed to protecting investors—including those whose capital powers the engines of innovation in Silicon Valley—from start-ups that misrepresent their finances and try to cut corners.”

In addition to his 18-month prison sentence, Lachwani was ordered to serve three years of supervised release and pay a $1 million fine. The case is being prosecuted by the Corporate and Securities Fraud Section of the United States Attorney’s Office, with the assistance of the FBI. The U.S. Attorney’s Office and the FBI thank the San Francisco Regional Office of the Securities and Exchange Commission for their assistance in the investigation.