After starting HeadSpin in 2015, the founder Manish Lachwani engaged in fraud, using fake invoices and inflated revenue numbers to paint a stronger financial picture. Despite raising $117 million in investment, the company had no CFO, HR department, or audits. Investors were aware of the inaccuracies, but pushed investments to a $1.1 billion valuation. After pleading guilty in April, Lachwani could face up to 20 years in prison for each count of fraud. Loose regulations and oversights at start-ups have led to more cases of fraud being uncovered. Among these, the founder of Nikola and an investor from Silicon Valley have been indicted. HeadSpin’s CEO has mentioned that corporate governance has since improved. Despite the misrepresentations, the company continued operations and secured new funding from Atlassian Ventures. A letter from his lawyers argued for a reduced sentence, claiming that despite being untruthful, the investors didn’t actually lose money.
Unraveling the Fraud: The Inside Story of a Boom-Time Start-Up without Oversight
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