The founder of Centricity, a data analytics firm that claimed to use artificial intelligence technologies, now faces serious allegations of fraud. Michael Brackett, the mastermind behind the company, has been indicted in Manhattan federal court for allegedly deceiving investors by manipulating bank statements and revenue numbers. This manipulation was done to give the false impression that Centricity was a successful venture, when in reality, it was on the verge of collapse.
Brackett managed to raise a substantial amount of funds, amounting to $2.5 million, from angel investors in 2019. With these investments, Centricity set out to revolutionize the way consumer demand is forecasted in real time. Brackett even had ambitious plans to raise $10 million in 2021. However, instead of achieving these lofty goals, Brackett resigned and Centricity crumbled. The alleged fraud came to a halt when Brackett failed to attract further investors and ran out of funds.
According to prosecutors, Centricity painted a misleading picture of its success to investors. While the company claimed to have 13 large U.S. manufacturers and retailers as clients, the reality was quite different. Prosecutors discovered that only two of those 13 firms were actually clients of Centricity. To further deceive investors, Centricity circulated documents indicating an annual revenue of $3.7 million. These falsified figures were used to entice investments and secure short-term loans from unsuspecting lenders.
One of the most distressing aspects of this fraudulent scheme is the case of an unidentified victim firm. Unbeknownst to them, this firm wired a considerable sum of $500,000 to Centricity based on the false information provided by Brackett. It didn’t take long for this victim to realize the deception, but it was too late. Their bank, along with Centricity, was unable to recover the funds, leaving the victim with significant losses.
As Centricity’s collapse became increasingly apparent, Brackett allegedly transferred the victim firm’s funds out of the account, exacerbating the financial ruin. Prosecutors contacted investors in 2022, seeking documentation and financial details related to their investments in Centricity. These actions were part of the ongoing investigation surrounding Brackett’s fraudulent activities.
Brackett, an American citizen residing in Switzerland, now faces charges of securities fraud and wire fraud. Federal authorities arrested him in Maine. This recent case echoes similar fraud allegations involving other startup founders. Charlie Javice, the founder of fintech Frank, also faced accusations of manipulating metrics to deceive JPMorgan and force an acquisition. Additionally, SoftBank’s Vision Fund recently filed a lawsuit against a startup for defrauding them of $150 million using techniques similar to those employed by Brackett and Javice.
The case of Centricity serves as a stark reminder of the dangers lurking in the world of investment. Investors must exercise caution and thoroughly vet potential ventures before committing their funds. These incidents highlight the importance of due diligence and the need for regulatory measures to protect investors from falling victim to fraudulent schemes. While artificial intelligence may hold great promise for various industries, it is essential to remain vigilant and weed out those looking to exploit this technology for their own gain. Only through transparency and accountability can the potential benefits of artificial intelligence be fully realized.