Risk register · entry
Q-F · FraudHeadSpin
A unicorn valued on revenue that was faked, inflated to roughly eight times the real figure.
The fifth quadrant, where the thing was never real. The tell is that the story is too clean.
Why this room
The payoff was simple in construction (fabricate invoices, inflate one number) but the failure was a fat tail rather than a gradual drift: because valuation is a multiplier on reported revenue, a founder-controlled lie compounded silently for three years before collapsing all at once into an 800-million-dollar valuation write-down.
The record
- Series C valuation, February 2020: $1.16 billioncertain
- Revised valuation after investigation: $300 millioncertain
- Reported 2019 ARR: approximately $80 million vs actual ARR approximately $10 million (roughly 8x overstatement)certain
- Total revenue overstatement 2018-H1 2020: reported $95.3 million vs actual $26.3 millioncertain
- ARR overstated by approximately $51-55 million per SECcertain
- Series C raise: $60 million (Feb 2020)certain
- Total investors defrauded / harmed: $80 million (Series B and C combined)likely
- Approximately 70% of principal returned to Series B/C investors via recapitalizationcertain
- Investors named: Tiger Global, Dell Technologies Capital, Iconiq Capitalcertain
- Lachwani personal stock sale during 2019 fundraising: $2.5 millionlikely
- Lachwani forced resignation: May 2020certain
- SEC and DOJ charges filed: August 25-26, 2021certain
- Guilty plea: two counts wire fraud, one count securities fraud, April 2023certain
- Sentencing: 18 months prison, $1 million fine, 3 years supervised release, April 22, 2024certain
- Fabricated example: $720,000 actual one-time purchase inflated to $1.44 million claimed annual contractcertain
- HeadSpin corporate SEC settlement: charged but no financial penalty, citing remediation and cooperationcertain
Sources
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
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