US charges HeadSpin ex-CEO over fake $1bn valuation scheme
HeadSpin has been charged $1 billion by the SEC and the US Department of Justice for allegedly defrauding investors by falsely claiming that the company had achieved strong and consistent growth. The organization markets itself as an AI testing, dev-ops, and mobile testing platform. For two years, officials state that the CEO of HeadSpin inflated key financial metrics, doctored internal sales records, and falsely increased deal values currently under discussion with potential clients. The result of these actions made it look as though the company was secure and guaranteed revenue streams.
The SEC also states that these methods allowed CEO Manish Lachwani to enrich himself by selling $2.5 million of his own HeadSpin shares during a funding round. Due to the company’s practices of inflating metrics, the company misled investors into believing that the startup had achieved a certain status by passing the $1 billion valuation threshold. However, the actions were eventually discovered and reported after an internal investigation by the firm’s board.