This case was last updated from PACER on 08/26/2021 at 05:47:18 (UTC).

Securities and Exchange Commission v. Lachwani

Case Summary

On August 25, 2021, the Securities and Exchange Commission (the “SEC” or “Commission”), represented by David Zhou, Erin Eddy Wilk and Marc David Katz, attorneys at the SEC’s Los Angeles Regional Office, filed a civil enforcement action against Manish Lachwani (“Lachwani” or “Defendant”), seeking injunctive relief along with civil penalties for the alleged fraudulent misrepresentation of his company’s financials in order to deceive investors into pouring millions of dollars into the company. This case was filed in the U.S. District Court in the Northern District of California with Judge Nathanael M. Cousins presiding.

 

In its complaint, the SEC alleged that, “From at least 2018 through 2020, Manish Lachwani engaged in a fraudulent scheme to propel the valuation of his Silicon Valley technology start-up, HeadSpin, Inc., to over $1 billion by falsely inflating the company’s key financial metrics and doctoring its internal sales records. Lachwani then used HeadSpin’s inflated valuation and financial numbers to deceive investors into pouring approximately $80 million into the company between 2018 and 2020, and to enrich himself through the offer and sale of approximately $2.5 million of his personal HeadSpin stock.”

 

The SEC further alleged that, “HeadSpin made virtually all of its revenue by charging customers fees to use its hardware and software products. To create the illusion of strong and consistent growth, Lachwani, who controlled all important aspects of HeadSpin’s financials and sales operations, falsely inflated the values of numerous customer deals that, in reality, were much smaller. He also fraudulently treated uncommitted deal amounts that he had discussed with customers as if they were guaranteed future payments. He concealed this inflation by creating fake invoices and altering real invoices to make it appear as though customers had been billed higher amounts.”

 

The SEC also alleged that, “Lachwani knowingly or recklessly provided these lies about HeadSpin’s valuation and its seeming financial success to prospective investors. He made numerous false statements that were designed to convince investors that HeadSpin had hundreds of customers, including many of Silicon Valley’s biggest and most high-profile companies, signed up to long-term contracts totaling tens of millions of dollars per year. Investors invested millions of dollars in HeadSpin based on Lachwani’s misrepresentations.”

 

The SEC lists out two claims for relief. The first claim is for alleged violations of Section 10(b) of the Exchange Act and Rule 10b-5. The second claim is for alleged violations of Section 17(a) of the Securities Act. The Plaintiff alleged that Lachwani's fraudulent actions increased HeadSpin’s revenue-related financial measures, which, in turn, fueled the company’s valuation upward, and it ultimately acquired so-called “unicorn” status.

 

In its prayer for relief, the SEC requested the Court to permanently enjoin the Defendant from directly or indirectly violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act, and from directly or indirectly participating in the issuance, purchase, offer, or sale of any security. Further, the SEC requested the Court to order the Defendant to pay civil penalties pursuant to Section 20(d) of the Securities Act and Section 21(d) of the Exchange Act, and prohibit the Defendant from serving as an officer or director of any issuer having a class of securities registered with the Commission pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act, pursuant to Section 20(e) of the Securities Act and Section 21(d)(2) of the Exchange Act.

 

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Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    5:21-CV-06554

  • Filing Date:

    08/25/2021

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Finance - Security/Commodity/Exchange

Judge Details

Presiding Judge

Nathanael M. Cousins

 

Party Details

Plaintiff

Securities and Exchange Commission

Defendant

Manish Lachwani

Attorney/Law Firm Details

Plaintiff Attorneys

David Zhou

Attorney at U.S. Securities and Exchange Commission

44 Montgomery Street, Suite 2800

San Francisco, CA 94104

Marc David Katz

Attorney at Securities and Exchange Commission

44 Montgomery Street, Suite 2800

San Francisco, CA 94104

Erin Eddy Wilk

Attorney at Securities and Exchange Commission

44 Montgomery Street, Suite 2800

San Francisco, CA 94104

 

Court Documents

#6

(#6) Summons Issued as to Manish Lachwani. (sfbS, COURT STAFF) (Filed on 8/25/2021) (Entered: 08/25/2021)

#5

(#5) Initial Case Management Scheduling Order with ADR Deadlines: Case Management Statement due by 11/17/2021. Initial Case Management Conference set for 11/24/2021 10:00 AM in San Jose, Courtroom 5, 4th Floor. (sfbS, COURT STAFF) (Filed on 8/25/2021) (Entered: 08/25/2021)

#4

(#4) CONSENT/DECLINATION to Proceed Before a US Magistrate Judge by Securities and Exchange Commission.. (Zhou, David) (Filed on 8/25/2021) (Entered: 08/25/2021)

#2

(#2) Proposed Summons. (Katz, Marc) (Filed on 8/25/2021) (Entered: 08/25/2021)

1 #1

Civil Cover Sheet

#1

(#1) COMPLAINT against Manish Lachwani. Filed bySecurities and Exchange Commission. (Attachments: #1 Civil Cover Sheet)(Wilk, Erin) (Filed on 8/25/2021) (Entered: 08/25/2021)

 

Docket Entries

  • 08/25/2021
  • View Court Documents
  • Docket(#6) Summons Issued as to Manish Lachwani. (sfbS, COURT STAFF) (Filed on 8/25/2021) (Entered: 08/25/2021)

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  • 08/25/2021
  • View Court Documents
  • Docket(#5) Initial Case Management Scheduling Order with ADR Deadlines: Case Management Statement due by 11/17/2021. Initial Case Management Conference set for 11/24/2021 10:00 AM in San Jose, Courtroom 5, 4th Floor. (sfbS, COURT STAFF) (Filed on 8/25/2021) (Entered: 08/25/2021)

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  • 08/25/2021
  • View Court Documents
  • Docket(#4) CONSENT/DECLINATION to Proceed Before a US Magistrate Judge by Securities and Exchange Commission.. (Zhou, David) (Filed on 8/25/2021) (Entered: 08/25/2021)

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  • 08/25/2021
  • Docket(#3) Case assigned to Magistrate Judge Nathanael M. Cousins. Counsel for plaintiff or the removing party is responsible for serving the Complaint or Notice of Removal, Summons and the assigned judge's standing orders and all other new case documents upon the opposing parties. For information, visit E-Filing A New Civil Case at http://cand.uscourts.gov/ecf/caseopening.Standing orders can be downloaded from the court's web page at www.cand.uscourts.gov/judges. Upon receipt, the summons will be issued and returned electronically. Counsel is required to send chambers a copy of the initiating documents pursuant to L.R. 5-1(e)(7). A scheduling order will be sent by Notice of Electronic Filing (NEF) within two business days. Consent/Declination due by 9/8/2021. (bwS, COURT STAFF) (Filed on 8/25/2021) (Entered: 08/25/2021)

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  • 08/25/2021
  • View Court Documents
  • Docket(#2) Proposed Summons. (Katz, Marc) (Filed on 8/25/2021) (Entered: 08/25/2021)

    Read MoreRead Less
  • 08/25/2021
  • View Court Documents
  • Docket(#1) COMPLAINT against Manish Lachwani. Filed bySecurities and Exchange Commission. (Attachments: #1 Civil Cover Sheet)(Wilk, Erin) (Filed on 8/25/2021) (Entered: 08/25/2021)

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