A trio of executives has been charged in an alleged accounting fraud scheme that overstated the revenues of a company ahead of its acquisition by an investment vehicle, a special purpose acquisition company (SPAC) — which quickly ended in bankruptcy.
The former CEO and CFO of a tech firm, Near Intelligence, Inc., were charged, along with the CEO of a mobile advertising company, MobileFuse LLC, for allegedly perpetrating a scheme to inflate Near’s value before it was sold to a SPAC.
According to an indictment that was unsealed in a federal court in Manhattan Thursday, the scheme involved an alleged series of “round trip” transactions between the two companies, from 2021 to the end of 2023, that enabled Near to fraudulently inflate its reported revenue by at least US$25 million — in part, to boost its appeal to a SPAC looking to make an acquisition. The revenue inflation continued after the company went public in early 2023, U.S. authorities said.
The alleged scheme unraveled in late 2023, and Near filed for bankruptcy by the end of that year, less than nine months after it went public.
U.S. authorities alleged that the executives sought to conceal the company’s fraudulent accounting practices by misleading its auditors, and that the Near executives embezzled hundreds of thousands of dollars from the company.
The indictment charges Near’s former CEO and former CFO, Anil Mathews and Rahul Agarwal, along with MobileFuse’s former CEO, Kenneth Harlan, with conspiracy and securities fraud. The Near executives were also charged with wire fraud, and Mathews was charged with aggravated identity theft in connection with the alleged embezzlement.
None of the allegations have been proven, and they are presumed to be innocent of the charges.
In a statement, Harlan’s attorney, Brian Linder, said, “We will vigorously defend our client against these unfounded charges. Mr. Harlan had no knowledge of, nor willing role in, the fraud allegedly perpetrated by Near Intelligence. We fully expect to be vindicated in court.”
The U.S. authorities are seeking extradition for Mathews, who was arrested in France in connection with these charges. Harlan was also arrested Thursday in the U.S. Agarwal, a resident of India, remains at large.
“These defendants allegedly manipulated their executive positions within their respective companies to create a mirage of financial success and attract prospective buyers. The FBI is determined to apprehend any individual who relies on fraudulent misrepresentations to improve their economic portfolio,” said FBI assistant director in charge, Christopher Raia, in a release.
“Our investors, businesses and employees depend on the integrity of our capital markets. Market integrity is one of America’s great competitive advantages, and this office will hold those who undermine that essential integrity to account,” added Jay Clayton, U.S. attorney for the Southern District of New York, in a statement.