Press Release

Remediation Helps Tech Company Avoid Penalties

SEC’s fraud case against Silicon Valley-based HeadSpin, Inc.’s former CEO is ongoing

For Immediate Release


Washington D.C., Jan. 28, 2022 —

The Securities and Exchange Commission today announced settled fraud charges without a penalty against HeadSpin, Inc., a private technology company that made significant remedial efforts in the wake of an internal investigation into misconduct by its now former CEO.

"For companies wondering what types of remedial actions and cooperation might be credited by the Commission after a company uncovers fraud, this case offers an excellent example," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "HeadSpin’s remediation and cooperation included not just its internal investigation and revised valuation, but also repaying harmed investors and improving its governance—all of which were factors that counseled against the imposition of a penalty in this case."  

The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, alleges that from at least 2018 through 2020, HeadSpin, through its former CEO Manish Lachwani, engaged in a fraudulent scheme to propel the Silicon Valley-based company’s valuation to over $1 billion by falsely inflating its key financial metrics and doctoring internal sales records.

According to the complaint, Lachwani controlled all important aspects of HeadSpin’s financials and sales operations, significantly inflated the value of numerous customer deals, and concealed this inflation by creating fake invoices and altering real invoices to make it appear as though customers had been billed higher amounts. Lachwani’s fraud unraveled after the company’s Board of Directors conducted an internal investigation which led to the CEO’s removal, a revised valuation down to $300 million, and remedial efforts including repaying investors.

HeadSpin’s remedial actions also included hiring new senior management, expanding its board, and instituting processes and procedures designed to ensure transparency and accuracy of deal reporting and associated revenues.

The SEC’s complaint alleges that HeadSpin violated the antifraud provisions of the federal securities laws. Without admitting or denying the allegations, HeadSpin agreed to be permanently enjoined from violations of these provisions. The settlement is subject to court approval.

The SEC’s investigation was conducted by Erin E. Wilk and Ellen Chen, and supervised by Jennifer J. Lee and Monique C. Winkler of the San Francisco Regional Office.  The SEC’s litigation against HeadSpin’s former CEO is ongoing and is being led by Marc Katz, David Zhou, and Ms. Wilk.


Last Reviewed or Updated: Jan. 28, 2022