Original Darktrace Investor Found Not Guilty

Uploaded on 2024-06-08 in NEWS-Cybersecurity News, FREE TO VIEW, BUSINESS-Services-Law

Mike Lynch, a British technology leader and an original investor in Darktrace, has been cleared of fraud charges that he faced in the US because of the $11bn (£8.6bn) 2011 sale of his software company, Autonomy, to Hewlett-Packard.

The San Francisco jury cleared him on Thursday 6th June after an eleven and half week trial. They found him not guilty on all counts, an unexpected result after Mr Lynch, who had been charged with falsely inflating the value of Autonomy.

During the trial the prosecutors had sought to tie Mr Lynch to allegedly fraudulent “round-trip” agreements in which Autonomy paid customers to buy its services and accounting fraud that inflated the company’s revenues. They painted Mr Lynch as an intimidating boss who ruled over all aspects of the business and had compared Autonomy to the mafia.

Lynch took the stand to defend himself against charges that would have potentially imprisoned him for at least 20 years if convicted.

Prosecutors said that Lynch was an intimidating, ruthless businessman who was responsible for every facet of Autonomy’s empire. Jurors heard about the company’s headquarters, and meeting rooms named after James Bond villains. In his trial he said that he had focused on technology, not accounting, distancing himself from the company's former chief financial officer, who was has been prosecuted for fraud.

Lynch co-founded Autonomy in 1996 and led it as it grew to be one of the UK's biggest companies, winning him comparisons to Bill Gates and Steve Jobs. The company, known for software that could extract useful information from "unstructured" sources such as phone calls, emails or video, was ultimately sold to Hewlett-Packard (HP) in 2011 in a deal that ranked, at the time, as the largest-ever takeover of a British technology business. “This is a momentous day in Autonomy’s history,” Mike Lynch declared in a press release on 18 August 2011. He was announcing the sale Autonomy, his software firm, to Hewlett-Packard (HP) for $11bn.

Lynch made £500m from the sale, but a year later, HP reduced the value of Autonomy by $8.8bn and the long legal battles followed.

The company's chief financial officer, Sushovan Hussain, was found guilty of fraud in 2018 and later sentenced to five years in prison. The US brought charges against Lynch in 2018, saying that he had increased the value of the firm using backdated agreements to mislead about the company's sales; concealing the firm's loss-making business reselling hardware; and intimidating or paying off people who raised concerns.

He was eventually cleared after a UK judge ruled in favour of HP in a similar civil fraud case in 2022. HP is seeking a reported $4bn in that case.

Lynch is a former UK government adviser. who has been on the boards of the BBC and the British Library, had faced house arrest in the US, while preparing for the trial, which began in San Francisco in March 2024. He now returns to the UK in a further attempt to clear his name.

Image: Katrin Boltosova

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