Ex-Billionaire Rishi Shah jailed for $1B fraud

Indian-American former billionaire Rishi Shah, aged 38, has been sentenced to seven and a half years in prison for defrauding investors.

| Updated: 02 July, 2024 3:23 pm IST
Indian-American former billionaire Rishi Shah, aged 38, has been sentenced to seven and a half years in prison for defrauding investors like Goldman Sachs, Alphabet, and the Pritzker Group venture fund of $1 billion, according to Bloomberg.
Indian-American former billionaire Rishi Shah, aged 38, has been sentenced to seven and a half years in prison for defrauding investors like Goldman Sachs, Alphabet, and the Pritzker Group venture fund of $1 billion, according to Bloomberg.

NEW DELHI: Indian-American former billionaire Rishi Shah, aged 38, has been sentenced to seven and a half years in prison for defrauding investors like Goldman Sachs, Alphabet, and the Pritzker Group venture fund of $1 billion, according to Bloomberg.

Shah co-founded Outcome Health, an advertising startup placing ads on TVs and in doctors’ offices. Last year, he and two other executives, including another Indian American, were convicted on multiple counts of fraud and money laundering by a federal jury. Chicago US District Judge Thomas Durkin pronounced the sentence last week, as per a July 1 statement from the United States Attorney’s Office.

The co-founders and executives involved are Rishi Shah (former CEO), Shradha Agarwal (former President, aged 38), and Brad Purdy (former COO and CFO, aged 35).

Initially named ‘Context Media Health’, the company was founded by Shah in 2006 while he was a student at Northwestern University. He gained attention in democratic circles and secured investments from Illinois Governor JB Pritzker’s venture capital firm. The fraud came to light in 2017, uncovered by the Wall Street Journal.

Prosecutors described Shah as the central figure behind deceitful actions towards clients, lenders, investors, and an audit firm, seeking a 15-year sentence for him. They requested 10-year sentences for Agarwal and Purdy. However, Judge Durkin sentenced Agarwal to three years in a halfway house and Purdy to two years and three months in prison.

The company exaggerated its advertising capabilities and misled multinational clients like Novo Nordisk A/S about its TV network’s reach in US doctors’ offices. This fraudulent activity, which funded Shah’s lavish lifestyle including private yacht and jet trips and a $10 million home, involved inflated financial statements in 2016, falsely boosting Shah’s net worth to over $4 billion.

In his statement to Judge Durkin, Rishi Shah expressed shame and regret for mismanaging the company, admitting to fostering a culture where fabricating data was deemed acceptable.

Investors, including Alphabet, Goldman Sachs, and Pritzker, sued Outcome in 2017 for fraud related to a $487.5 million fundraising round that resulted in a $225 million dividend for Shah and Agarwal.

Additionally, the US Securities and Exchange Commission (SEC) filed a lawsuit against Shah, Agarwal, Purdy, and former chief growth officer Ashik Desai, alleging the use of falsified financial statements to obtain funds.

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