Crime & Safety
AI CEO Admits To Defrauding Investors
The founder of a Bay Area AI startup pleaded guilty to securities and wire fraud to provide false information his startup's finances.
SAN FRANCISCO, CA — The founder and former CEO of a San Francisco-based AI startup pleaded guilty this week to securities and wire fraud charges for misleading investors about the financial health of the software company, according to the U.S. Attorney's Office.
Baba Nadimpalli, a 42-year-old Australian citizen who previously lived in San Francisco, entered the plea Wednesday in federal court. He admitted to one count of securities fraud and one count of wire fraud in connection with a scheme to provide false information about his startup's revenue, customer base, and annual recurring revenue or ARR, the U.S. Attorney's Office for the Northern District of California said.
Nadimpalli founded SKAEL in 2016 and served as its CEO until July 2022. The software-as-a-service company provided automation tools marketed as "Digital Employees" for corporate clients.
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From January 2020 through February 2022, SKAEL reportedly raised more than $40 million across three funding rounds. Federal prosecutors said Nadimpalli provided prospective and existing investors with false information about customer subscriptions, inflating the company's ARR, which is a key metric for investor evaluation.
In 2021, Nadimpalli falsely claimed that companies that were not SKAEL customers were generating ARR and overstated revenue from actual clients. He also misrepresented lapsed customers as active subscribers.
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In February 2022, SKAEL completed a $30 million Series A preferred stock offering that valued the company at roughly $230 million. Nadimpalli admitted to directing the creation of a data room for potential investors that included a spreadsheet with false ARR figures, inaccurate financial statements, and a misleading investor presentation.
He also admitted to providing falsified bank records to an investor and an employee, showing deposits that had not occurred.
Nadimpalli is scheduled to be sentenced on Sept. 17. He faces a maximum of 20 years in prison and a $5 million fine for the securities fraud charge, and 20 years and a $250,000 fine for the wire fraud charge.
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