The founder of an AI startup has been charged with cheating investors and changing papers.
Prosecutors said Tuesday that the founder of a data analytics company that supposedly used artificial intelligence technologies was charged in Manhattan federal court with trying to scam his investors by changing his bank statements and revenue numbers to make it look like he was doing well.
According to data from PitchBook, Michael Brackett got $2.5 million from angel investors in 2019 to start his business, Centricity, which promised to predict consumer demand in real-time. The Wall Street Journal reported that Brackett said he would get $10 million in 2021.
Instead, Brackett quit, and Centricity went out of business.
Prosecutors said the scam stopped when Brackett couldn’t find any more investors and ran out of money. Prosecutors say Centricity said it did business with 13 big U.S. manufacturers and retailers. Prosecutors say it sent papers to investors and other short-term lenders that said it made $3.7 million yearly.
Prosecutors say that only two of those 13 companies were clients of Centricity. Still, officials say that a victim company that has not been named wired $500,000 to Centricity without knowing that the CEO had given false information.
Prosecutors say that the unnamed victim found out “within days” that Brackett had committed theft. Prosecutors say that neither their bank nor Centricity could get the money back.
Brackett is said to have “transferred Firm-1’s funds out of the account,” soon after, the business went bankrupt.
Brackett, an American citizen who lived in Switzerland, is charged with securities fraud and bank fraud. Federal police picked him up in Maine on Tuesday, officials said.
The story of Centricity is similar to the fraud that Charlie Javice, the founder of the troubled company Frank, is said to have done. Like what was said about Brackett, it is noted that Javice changed her metrics to get JPMorgan to buy her company. Like Brackett’s unnamed victim, the bank didn’t find out about the fraud until after the deal.
SoftBank’s Vision Fund sued a company earlier this month, saying it scammed the fund out of $150 million using the same methods as Brackett and Javice.