Manish Lachwani Pleads Guilty to Securities Fraud in Silicon Valley

A Silicon Valley start-up founder has pleaded guilty to securities fraud charges for overstating revenue to investors. Manish Lachwani, 47, of Los Altos, Calif., admitted to disseminating false and overstated revenue metrics to lure investments into his company, HeadSpin, a software-as-a-service company.

According to his plea agreement, Lachwani provided prospective investors with inflated annual recurring revenue (ARR) numbers and overstated revenue numbers. He maintained and controlled an ARR spreadsheet that contained this false information and shared it with potential investors. In 2018, Lachwani sent a slide deck to investors stating HeadSpin’s ARR was over $33 million, though he knew the company’s ARR was far less. In 2019, he again provided information to investors that overstated ARR, stating it was $54 million when, in fact, it was far less.

The plea agreement provides several details of the fraud. Lachwani acknowledged that while HeadSpin was raising money, he provided to prospective investors information about the company’s business, customers, revenue, and finances. He also sent invoices to HeadSpin’s accountant that he knew were altered to show amounts not actually invoiced to clients. HeadSpin investors received financial statements that were impacted by the altered invoices.

Lachwani pleaded guilty to two counts of wire fraud and one count of securities fraud. If he complies with the plea agreement, the remaining counts will be dismissed at sentencing. He is currently released on bond.

U.S. District Judge Charles R. Breyer scheduled Lachwani’s sentencing hearing for September 27, 2023, at 10:00 a.m. The maximum statutory penalty for each count of wire fraud is 20 years in prison and a fine of $250,000. The maximum statutory penalty for securities fraud is 20 years in prison and a fine of $5 million, plus restitution if appropriate.

HeadSpin raised more than $100 million from investors over multiple rounds of fundraising, leading to a valuation of approximately $1.1 billion. The company provided clients with software tools and access to devices to test mobile applications. Lachwani founded the company in 2015 and served as its Chief Executive Officer until May 2020.

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