Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair announced that Headspin co-founder and former CEO Manish Lachwani’s was arrested for security and wire fraud charges.
Technology giant Headspin’s services permit customers to acquire mobile devices around the globe and remotely test applications across diverse communication networks in different locales. According to the complaint, the company profits by marketing subscriptions to its services.
Lachwani allegedly reported false revenue and overstated key financial metrics of the company to potential investors. Among these is Headspin’s annual recurring revenue (ARR) which is overstated by approximately $51 to 55 million.
According to a review of the company’s unaudited financial statements from its establishment to the first half of 2020 by an auditing firm in May 2020, Headspin’s cumulative revenue only totaled at approximately $26.3 million, instead of the originally $95.3 million. On the other hand the cumulative net loss is at approximately $15.9 million instead of the $3.7 million.
Lachwani is set to appear in federal court. He will be facing 20 years maximum jail time and a fine of $250,000 if found guilty of wire fraud. The charge would also be 20 years maximum jail time but with a fine of $5,000,000 if found guilty of securities fraud. He would be required to pay restitution if convicted of either count.
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