Silicon Valley got another shakeup this Fall with the arrest of Manish Lachwani, former CEO and co-founder of Headspin, a software startup that reached “unicorn” valuation within a matter of two years. The over $1 billion valuation led the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) to investigate the company’s meteoric rise and arrested Lachwani in August 2021 for defrauding investors.

According to The Register, prosecutors claim that Lachwani “raised money by overstating the company’s financial performance”. By altering the company’s revenue figures, he was allegedly able to raise $80 million from investors within a two year period. 

Lachwani’s defense team at Cooley LLP released a statement challenging the charges saying, “The government’s complaint makes no reference to the extensive evidence showing that Mr Lachwani acted in good faith throughout his time at HeadSpin. We look forward to presenting a complete and accurate factual picture in court, and to showing that the government’s allegations are wrong.”

Lachwani has been charged with one count of wire fraud and one count of securities fraud. He remains innocent until proven otherwise. However, if found guilty for both charges he could face a maximum sentence of up to 40 years of federal prison in addition to a hefty $5.25 million fine as outlined in the affidavit. 

According to the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, white collar crime prosecutions are up 11 percent this year. So if you or someone with your company is being investigated for investment fraud it is vital to consult with a defense attorney like Padula Law that has experience working directly with the DOJ. Give us a call at (888) 574-5155 to set up a discrete informational meeting.