Indian American Start-Up Founder Sentenced to 18 Months in Prison for Wire and Securities Fraud

Indian American tech entrepreneur Manish Lachwani was sentenced yesterday (April 19) to 18 months in prison, following his conviction on wire and securities fraud charges. Through HeadSpin, Inc., a Silicon Valley-based software-as-a-service (SaaS) company he founded, he gave false financial information to potential investors, while the company raised more than $100 million. The 47-year-old of  Los Altos, California, pleaded guilty on April 23, o two counts of wire fraud, and one count of securities fraud. 

Lachwani founded HeadSpin Inc., 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 more than $100 million from investors,” a Department of Justice press release said. But “to obtain that financing, Lachwani admitted that he provided potential investors with information about the company’s business, customers, revenue, and finances that he knew was inaccurate,” the DOJ said. 

He also admitted that he knowingly sent HeadSpin’s accountant false information about customer contracts that was incorporated into HeadSpin’s financial statements, as well as invoices that he knew had been altered to show amounts that had not actually been invoiced to clients.

“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.”

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In addition to the sentencing, Lachwani  was ordered to serve three years of supervised release to begin after his prison term is completed. He was also ordered Lachwani to pay a $1 million fine. A hearing is scheduled for July 31to address the issue of restitution.

(Top photo, YouTube screen grab)