A U.S. private equity firm was allegedly defrauded out of US$20 million by a fintech company that misrepresented its technology and its finances, U.S. authorities said in charging a pair of the fintech’s founders.
The former CEO at startup Mozaic Payment System Inc., Marcus Cobb, and the company’s co-founder and senior vice-president, Rachel Knepp, were both charged with wire fraud conspiracy in connection with venture financing that they raised from a Boston-based investment firm.
The company claimed to have a technology that processed royalty payment. According to an indictment, while the company’s technology didn’t work and it wasn’t generating any revenue, in 2023, the executives raised venture funding from a private equity firm by misrepresenting its finances. Specifically, it’s alleged that to secure the funding they fabricated bank and financial statements that falsely showed that the company was growing its revenue and increasing its available cash.
To sustain the scheme, they allegedly continued to provide false financials to the investment firm until it uncovered the alleged fraud in early 2025.
Cobb was indicted by a federal grand jury in Boston on Nov. 20, and was arrested in Chicago last week. Knepp was also charged last month, and pleaded guilty in federal court, U.S. authorities said. She will be sentenced on Feb. 19. Cobb is scheduled to appear in court on Jan. 8. The allegation against Cobb has not been proven.