Manish Lachwani, Wire and Securities Fraud, California 2024

Silicon Valley tech entrepreneur Manish Lachwani, 47, of Los Altos, California, was sentenced to 18 months in prison for wire fraud and securities fraud charges, announced United States Attorney Ismail J. Ramsey and Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp.

Lachwani, the founder of HeadSpin, Inc., 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.

Between April 2017 and April 2020, HeadSpin raised more than $100 million from investors. However, Lachwani admitted that he provided potential investors with information about the company’s business, customers, revenue, and finances that he knew was inaccurate.

Lachwani admitted to sending potential investors financial information that he knew overstated HeadSpin’s revenue and annual recurring revenue (ARR), which is 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, at that rate, over the course of a full year.

He was sentenced by the Hon. Charles R. Breyer, Senior United States District Judge, who also ordered Lachwani to serve three years of supervised release to begin after his prison term is completed. Additionally, Lachwani was ordered to pay a $1 million fine and a restitution hearing was scheduled for July 31, 2024.

“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 case is being prosecuted by the Corporate and Securities Fraud Section of the United States Attorney’s Office, with Assistant U.S. Attorneys Lloyd Farnham and Noah Stern leading the prosecution. 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 case.”

Source: https://www.justice.gov/usao-ndca/pr/silicon-valley-start-founder-sentenced-18-months-prison-wire-fraud-and-securities