Autonomy Founder Mike Lynch Extradited To U.S. To Face Fraud Charges
Mike Lynch, a prominent British tech entrepreneur, has been extradited from the U.K. to the U.S. to face criminal fraud…
Mike Lynch, a prominent British tech entrepreneur, has been extradited from the U.K. to the U.S. to face criminal fraud charges. The charges stem from the 2011 sale of his software company, Autonomy, to U.S.-based HP for $11bn.
U.S. prosecutors accuse Lynch of fudging Autonomy’s books to trick HP into paying a higher price for his company. HP paid $11bn for Autonomy in 2012 and wrote down $8.8bn of its value barely a year later. The American tech company filed a civil suit against Lynch in 2015, accusing him of inflating Autonomy’s revenues by $700mn.
In 2018, the U.S. Justice Department filed a criminal case against Lynch and sought extradition. The agency accused Lynch of, among other things, backdating contracts to inflate Autonomy’s revenue and lying to auditors, regulators, and shareholders. Lynch fought against extradition for several years but lost his final appeal this April. On Thursday, he boarded a flight to California to face fraud charges, the U.K. Home Office confirmed.
- Lynch was detained in San Francisco upon arrival. According to court documents, he was ordered to pay a $100mn bail package “secured by $50 million in cash or unencumbered shares of publicly traded stock, accompanied by power of sale.” He’ll also be confined under house arrest in San Francisco, guarded by private security he must pay for. No trial date has been set.
- Lynch wasn’t the only one indicted by U.S. authorities over Autonomy’s sale. Sushovan Hussain, Autonomy’s former Chief Financial Officer, was indicted for fraud, tried, and sentenced to 5 years in prison in 2019. He was also fined $4mn and ordered to forfeit $6mn of assets.
Lynch was a celebrated tech tycoon in the U.K. before his fraud charges surfaced. Autonomy’s $11bn acquisition represented the biggest sale of a U.K. software company and the second-biggest sale of a local tech company, only surpassed by SoftBank’s $31bn acquisition of chip designer Arm Holdings in 2016.
Lynch received over $700mn from selling his Autonomy shares to HP. After the sale, he co-founded Invoke Capital, a venture capital firm, and Darktrace, a cybersecurity company. Darktrace listed its shares on the London Stock Exchange in 2021 and has a current market value of £2bn ($2.5bn). Lynch and his wife are Darktrace’s biggest individual shareholders, even after selling a £100mn ($125mn) stake this February.
Another noteworthy Darktrace shareholder is Sushovan Hussain, the former Autonomy finance chief serving a U.S. prison sentence. He held a 2.8% stake worth about £80mn ($100mn) when Darktrace listed its shares in 2021.
- There’s a long line of entrepreneurs accused of fudging the books to receive money from investors or acquirers. A recent one was Charlie Javice, founder of college loan startup Frank, indicted for inflating user numbers to sell her startup to banking giant J.P. Morgan Chase. The bank paid $175mn for Frank, of which Javice stood to gain over $45mn.
- Another recent case was Carlos Watson, founder of media company Ozy, indicted for lying to investors to raise tens of millions of dollars, including forging cable television contracts and impersonating a YouTube executive on a video call.
- Yet, Lynch’s case is one of the biggest so far, judging by HP’s $8.8bn writedown and the $700mn+ proceeds of his alleged crimes.