by Chris Dolmetsch and Ava Benny-Morrison, Bloomberg
Three men were indicted for allegedly conspiring to fraudulently boost the value of data-insight company Near Intelligence Inc. before it was acquired by a blank check firm in 2022.
Federal prosecutors in New York on Thursday unsealed charges against the company’s founders for allegedly exchanging fake invoices and inflated payments with a mobile-advertising firm, to make Near Intelligence’s revenue appear more than 10 times higher than it actually was.
The company’s chief executive officer, Anil Mathews, and its chief financial officer, Rahul Agarwal, were named in the indictment, along with Kenneth Harlan, the CEO of the mobile-advertising firm, MobileFuse. The alleged accounting fraud overstated the company’s revenue by about $25 million, prosecutors said.
Near Intelligence, which provided data insights to major companies including Wendy’s Co. and Ford Motor Co., filed for bankruptcy in December 2023, less than a year after it combined with SPAC KludeIn Acquisition Corp.
The Pasadena, California-based company was one of nearly two dozen firms that went bankrupt in 2023 after going public by merging with a SPAC. Those failures represented more than $46 billion in shareholder losses and included several major firms, including flexible workplace provided WeWork Inc., which boasted a $9.4 billion market value after going public in 2021.
SPACs, or special purpose acquisition companies, exploded in the wake of the pandemic, drawing the attention of celebrities and financiers as investors poured money into the vehicles, before stricter regulations and plunging stocks of post-merger firms led markets to pull back.
Mathews, 51, of Laguna Niguel, California, fled to France during the investigation and was arrested there, prosecutors said. The US is seeking his extradition.
Agarwal, 40, an Indian citizen, is not in custody. Harlan, 52, of Princeton, New Jersey, was arrested earlier today, pleaded not guilty during a court appearance in New York and was released on $1 million bail.
Brian Linder, a lawyer for Harlan, said his attorneys will “vigorously defend” their client as against “these unfounded charges.”
“Mr. Harlan had no knowledge of nor willing role in the fraud allegedly perpetrated by Near Intelligence,” Linder said in a statement. “We fully expect to be vindicated in court.”
Lawyers for Mathews didn’t respond to requests for comment on the charges, and Agarwal didn’t respond to a message sent on LinkedIn.
Prosecutors said that the alleged scheme involved “round-tripping” money through Harlan’s firm, exchanging fake invoices that inflated payments in order to make Near Intelligence’s revenue from MobileFuse’s business appear higher.
The indictment alleges that the scheme operated between between May 2021 and September 2023. Prosecutors said Near Intelligence secretly funneled money to MobileFuse, which then returned the funds along with smaller amounts the company actually owed Near Intelligence for its services. Near then allegedly booked the entire payments as revenue, even though they were about 10 times the amount of the real invoices.
Near Intelligence board members terminated Agarwal and Mathews in November 2023 following an internal investigation into MobileFuse payments. The company filed bankruptcy the following month and said at the time that Near Intelligence paid MobileFuse tens of millions of dollars “for phony data services” as part of a scheme to inflate both companies’ revenues as well as Agarwal and Mathews compensation.
Near Intelligence told a bankruptcy judge it also struggled to keep existing customers or obtain new ones because of fierce competition from rival data intelligence firms. Near Intelligence filed bankruptcy at the end of 2023 and sold its assets to distressed-company lender Blue Torch Finance in a deal that traded at least $34 million of debt for ownership, according to court documents. A judge later approved a winddown plan for what was left of Near Intelligence.
Mathews and Agarwal were also accused of taking money from the company to pay for personal expenses, with Mathews allegedly taking hundreds of thousands of dollars to pay for a home in Laguna Beach, California. Prosecutors alleged Agarwal transferred more than a million dollars to a Singaporean company he owned and hundreds of thousands of dollars in additional funds to a company owned by another Near executive.
The three men are charged with conspiracy to commit securities fraud and securities fraud. Mathews and Agrawal, 40, are also charged with wire fraud, and Mathews was also charged with aggravated identity theft. They face as much as 20 years in prison if convicted of the most serious charges.
The case is 24-cr-630, US District Court, Southern District of New York.
–With assistance from Jonathan Randles, Steven Church, Jill R. Shah and Bob Van Voris.
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