Two former executives at Near Intelligence face federal fraud charges for allegedly running a revenue inflation scheme with their company's biggest customer, according to a complaint filed this week in the Southern District of New York.
Anil Mathews, Near's former CEO, and Rahul Agarwal, the company's ex-CFO, allegedly orchestrated what prosecutors describe as a "round-trip" accounting fraud with advertising technology firm MobileFuse between May 2021 and September 2023.
The SEC also charged MobileFuse and its former CEO Kenneth Harlan with helping the two executives pull off the scheme.
The complaint alleges the fraud inflated Near's revenue by $37.3 million out of total reported revenue of $138.3 million during the scheme's operation. Near filed for bankruptcy in December 2023, shortly after announcing its financial statements couldn't be trusted.
How the Round-Trip Payments Worked
The mechanics were straightforward but effective, according to the SEC complaint. MobileFuse would send Near an inflated invoice, Near would wire funds to MobileFuse, and MobileFuse would transfer money back to Near. Near then booked the full amount it received from MobileFuse as legitimate revenue.
"The purpose of the round-trip scheme was to falsely inflate Near's revenue, or to 'juice' the revenue through 'the turn around payment system' which 'allows [Near's] revenue to be higher,'" according to internal communications cited in the complaint.
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In one exchange from May 2021, Harlan told Agarwal the invoice arrangement would "allow your [Near's] revenue to be higher." The complaint includes multiple emails where MobileFuse employees explicitly referred to "turnaround" payments and coordinated timing to complete the circular transactions.
The invoices sometimes inflated amounts by as much as 98%, regulators said. After netting out the round-trip payments, the actual amounts MobileFuse owed Near for data access services were substantially smaller than the amounts Near recorded as revenue.
Growing Wave of Tech and Fintech Fraud Cases
The Near Intelligence charges arrive during a period of increased SEC enforcement against technology and financial sector fraud.
Last month, the SEC charged seven companies with defrauding retail traders through fake cryptocurrency trading platforms and WhatsApp investment clubs that stole more than $14 million from investors.
In December, regulators also charged a medical resident with running a spoofing scheme that generated nearly $374,000 in profits through off-hours stock trading, while a separate case involved a Discord-based fund manager who allegedly fabricated credentials and fund performance to steal $18 million from more than 40 investors.
SPAC Merger Motivations
Federal prosecutors believe the scheme started before Near became publicly traded and was designed to make the company more attractive for a Special Purpose Acquisition Company merger . In May 2022, SPAC KludeIn announced plans to acquire Near at a valuation approaching $1 billion.
The merger closed in March 2023, with the combined company listing on Nasdaq under the ticker NIR. Near's inflated financial statements were included in multiple registration statements filed with the SEC, all signed by Mathews.
Text messages between Harlan and MobileFuse's co-owner in February 2022 discussed Near's SPAC plans, with Harlan noting Near needed MobileFuse to "juice their revenue and they know us best."
The SEC alleges Mathews and Agarwal had their own financial motivations for keeping the fraud going. Both received Near stock and restricted stock units when the SPAC merger completed. Mathews also pocketed a $41,331 performance-based bonus shortly after Near went public.
Near's Collapse and Bankruptcy
To hide the scheme from Near's independent auditors, the defendants allegedly fabricated documents and made false statements.
Near's board placed both executives on administrative leave in October 2023 and warned investors that financial statements for 2020 through 2022, plus the first two quarters of 2023, shouldn't be relied upon because revenue may have been overstated.
The company terminated Mathews on November 15, 2023 and Agarwal on November 21, 2023, citing financial mismanagement and fraudulent actions. Near filed for Chapter 11 bankruptcy protection less than three weeks later to liquidate its assets.
The company's bankruptcy plan was approved in March 2024, and Near terminated its SEC registration later that month.
The SEC is seeking permanent injunctions against all four defendants, officer and director bars against Mathews and Agarwal, disgorgement of ill-gotten gains from Mathews with prejudgment interest, and civil penalties against all defendants.
