She took the phrase “fake it ‘til you make it,” a bit too literally.
A startup founder has pleaded guilty to cooking the books of her human resources software firm and lying about how many customers it had in order to attract over $5 million from venture capitalists focused on diverse investing.
Crystal Huang, 41, of Lehi, Utah, admitted that she doctored the balance sheets for her company, ProSky Inc., in order to raise funding from venture firms. She also lied about having hundreds of clients and millions of dollars in recurring revenue when she had almost no money coming in, federal prosecutors said.
“Who would have thought that a boring industry like human resources could be disrupted and turned into an exciting, fun, and much-needed industry,” Huang wrote in an online essay in 2018. “That has only been possible because of technology — especially software systems.”
Through the ruse, Huang managed to raise $5 million from 13 different investors in three separate funding rounds between 2015 and 2020, court documents showed. The investors were private equity and venture capital groups from New York, Illinois, California, Texas, Oregon, Arizona and Japan that focused on financing startups founded by minorities.
A civil lawsuit brought by the Securities and Exchange Commission in 2021 alleged that Huang used significant amounts of the money for herself and her family, including to pay credit card bills and buy property.
A message left with Huang’s attorney wasn’t immediately returned.
The company’s most recent investment round in late 2019 was led by New York’s Harlem Capital Partners, which agreed to give Huang $750,000 based on the false accounting, according to court filings.
A message left with representatives of Harlem Capital wasn’t immediately returned.
Huang is scheduled to be sentenced in August.
