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Table of Contents

Tech Exec’s $1.1B Scam

Manish Lachwani, the former CEO of Palo Alto-based technology company Headspin, has been arrested on charges of securities fraud and wire fraud. According to a federal complaint, Lachwani engaged in a scheme to raise millions of dollars from investors by reporting false revenue and overstating key financial metrics of the company.

Lachwani, 45, of Santa Clara County, was the CEO of Headspin from its inception in 2015 until approximately May 2020. During that time, the company raised millions of dollars from investors through four major rounds of financing. The complaint alleges that Lachwani engaged in a scheme of securities fraud and wire fraud during the Series C fundraising round, which occurred from November 2019 to early 2020.

According to the complaint, Lachwani reported false revenue and overstated key financial metrics of the company in materials and presentations to potential investors. The complaint alleges that Lachwani maintained control over operations, sales, and record-keeping, including invoicing, and was the final decision maker on what revenue was booked and included in the company’s financial records.

The company’s unaudited financial statements were reviewed by an auditing firm in May 2020. According to the complaint, the review concluded that Headspin’s cumulative revenues from inception through the first half of 2020 totaled only approximately $26.3 million, instead of the $95.3 million originally reported by the company.

The complaint alleges that Lachwani’s scheme caused investors to overvalue the company by approximately $500 million to $1.1 billion. After the company discovered the overstated revenue and recapitalized the company’s investors, the valuation of the company dropped to approximately $300 million.

Lachwani will make an initial appearance in federal court to face the charges in the federal complaint unsealed today.

An investigation by the FBI and the U.S. Attorney’s Office for the Northern District of California led to the charges against Lachwani. The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of California and the FBI’s San Francisco Field Office.