The co-founder of business automation startup Skael has been accused of illegally inflating its revenue.
Baba Nadimpali, who was CEO of the bankrupt company, was indicted on securities and wire fraud charges by a federal grand jury in San Francisco on Tuesday (September 24). He also faces fraud charges from the U.S. Securities and Exchange Commission (SEC).
“Startup founders cannot misrepresent the revenue metrics they disclose to investors until they are successful,” Monique C. Winkler, director of the SEC’s San Francisco Regional Office, said in a news release.
“While the SEC will continue to aggressively pursue private company executives who use false statements to solicit investor capital, we urge private company investors to remain vigilant.”
According to the indictment, Scale raised more than $40 million in three funding rounds between 2020 and 2022, but Nadimpali made false claims about the company’s revenue.
Prosecutors also allege that Nadimpali falsely represented to investors that his company’s clients included many well-known companies, and that the CEO falsified bank statements to show payments from clients that didn’t exist.
“Nadinpalli also allegedly spent hundreds of thousands of dollars of SKAEL funds on his own personal expenses, including house and car payments,” the SEC said.
The committee also noted that the CEO claimed Scale’s “annual recurring revenues were millions of dollars, more than 10 times the actual amount.”
PYMNTS reached out to Nadimpali, who is based in Australia, for comment but was unable to immediately be reached.
Skael, which operated from 2016 to 2022, helped clients automate repetitive tasks. Whatever the truth behind the company’s business, companies are increasingly turning to technology to reduce the burden of manual tasks and fragmented workflows.
Among these technologies is Robotic Process Automation (RPA), which can help businesses survive in a competitive market by modernizing AP and AR departments, enabling more efficient operations, and better managing cash flows.
“For many small and medium-sized businesses, the challenges with accounts payable/receivable lie in handling the volume and variety of documents, much of which is still paper-based or scattered across disparate systems,” PYMNTS wrote recently, pointing to survey results showing 75% of businesses still use paper checks.
“RPA provides a way to automate data entry, validation and processing, reducing the manual effort and potential for human error associated with these tasks.”
