The former CEO of tech startup Headspin has been charged with inflating its financial results to achieve high valuations that would attract investors.

The U.S. Securities and Exchange Commission said Manish Lachwani, 45, engaged in a fraudulent scheme that helped HeadSpin raise approximately $80 million from investors in Series B and Series C fundraising rounds between 2018 and 2020.

The alleged fraud involved inflating the value of numerous deals with users of HeadSpin’s mobile app testing services and treating uncommitted deal amounts as if they were guaranteed future payments to “create the illusion of strong and consistent growth,” the SEC said in a civil complaint.

HeadSpin’s valuation rose from about $500 million in its Series B fundraising round to about $1.1 billion in the Series C round, giving it prestigious “unicorn” status.

Lachwani was also arrested Wednesday on related criminal fraud charges that carry a maximum sentence of 20 years in prison.

“We allege that Lachwani misled investors into believing that HeadSpin had achieved a ‘unicorn’ valuation by winning hundreds of lucrative deals, including many with Silicon Valley’s biggest and most high-profile companies,” Monique Winkler, associate director of the SEC’s San Francisco Regional Office, said in a news release.

Lachwani co-founded HeadSpin in 2015 to provide hardware and software tools for testing mobile apps and ensuring they work on different operating systems.

Starting with the $20 milion Series B round in the fall of 2018, the SEC said, he inflated HeadSpin’s annual recurring revenue (ARR), a key metric, by falsely increasing the value of existing customer deals ranging from big deals with Silicon Valley heavyweights to low-dollar-value deals with smaller companies.

For the $60 million Series C round between August 2019 and February 2020, Lachwani allegedly provided investors with a spreadsheet that showed it made $10 million in ARR from a customer. In reality, it received a total of only about $1.4 million in payments from the customer between 2018 and 2019.

The SEC also said Lachwani enriched himself by selling $2.5 million of his HeadSpin shares in a secondary offering during which he made misrepresentations to an existing investor.

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