Speaking at the National Action Network House of Justice headquarters on Martin Luther King Jr. Day, U.S. Attorney for the Southern District of New York Damian Williams announced the indictment of the founder of a data analytics firm. The firm, which claimed to use artificial intelligence technologies, is accused of defrauding investors by manipulating bank statements and revenue numbers to create a false image of success.
The founder, Michael Brackett, raised $2.5 million from angel investors in 2019 to start his company Centricity. Centricity promised to provide real-time consumer demand forecasting using AI. Brackett had plans to raise $10 million in 2021 but instead resigned and the company collapsed.
According to prosecutors, the fraud stopped when Brackett ran out of funds and failed to attract further investors. Centricity had claimed to have 13 major U.S. manufacturers and retailers as clients, but in reality, they only had two. The company presented documents claiming $3.7 million in annual revenue to investors and lenders, but these figures were false.
Prosecutors allege that an unnamed victim firm wired $500,000 to Centricity, unaware that the information provided by Brackett was fraudulent. The victim discovered the fraud shortly after but was unable to recover the funds.
Brackett, a U.S. citizen and resident of Switzerland, has been arrested and faces charges of securities fraud and wire fraud.
This case is reminiscent of the fraud involving Charlie Javice, the founder of fintech startup Frank, who manipulated metrics to deceive JPMorgan into acquiring her company. SoftBank’s Vision Fund has also recently filed a lawsuit against a startup that defrauded them out of $150 million using similar tactics.
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