The former CEO of a tech company who was accused of misleading investors by overstating the firm’s financial results when raising venture capital has now pled guilty to fraud charges in the U.S.
Last year, Baba Nadimpalli, the founder and former CEO of SKAEL Inc. — a software firm that sold “digital employees” to companies built with artificial intelligence and automation software — was charged for allegedly overstating the company’s sales and revenue performance when raising US$40 million from investors in three rounds of venture financing between January 2020 and February 2022.
Specifically, U.S. authorities alleged that he engaged in a scheme to overstate the amount of recurring revenue the firm was generating from companies that paid annual subscriptions for its “digital employees.”
“Nadimpalli knew that [annual recurring revenue], which reflected the company’s monthly subscription revenue … was an important metric for investors,” U.S. authorities said. They alleged that he provided false information to investors, claiming that it received revenue from certain companies that didn’t subscribe to its software, overstated the revenue it received from actual customers and claimed that customers who had terminated their subscriptions were still current customers.
In a parallel civil action, the U.S. Securities and Exchange Commission (SEC) also filed charges against Nadimpalli, alleging that he violated securities rules. The SEC is seeking injunctive relief, disgorgement, civil penalties and an officer and director ban.
Nadimpalli has pled guilty in U.S. federal court to one count of securities fraud and one count of wire fraud. He also admitted to providing an investor and a financial employee with false banking information, which included purported customer payments that had not actually been deposited.
Nadimpalli is scheduled to be sentenced on Sept. 17.