WANdisco sees senior resignations on heels of £92m financial scandal

WANdisco has become yet another rising star of Silicon Valley falling victim to its own financial misconduct. In the latest development of the saga, WANdisco's co-founder and CEO David Richards and CFO Erik Miller have resigned.

Following revelations in March 2023 that cloud computing software firm WANdisco found potentially fraudulent irregularities in its finances, it has now become clear that there is a $115 million (£92 million) black hole in its revenues for 2022. The company confirmed that sales should have been recorded as $11.4 million (£9.1 million) rather than $127 million (£101.7 million).

On March 9, 2023, WANdisco suspended trading of its shares in London following disclosure of the irregularities. At the time, the company said it expected revenue for 2022 to be as low as $9 million (£7.2 million), plunging from its previous expectation of $24 million (£19.2 million).

WANdisco describes itself as offering a "data activation platform" to help businesses with digital transformation. The company moves large-scale data sets to the cloud, allowing clients to exploit their data by taking advantage of functions such as machine learning, artificial intelligence and data analytics on modern cloud computing platforms.

The implications of these developments are likely to be widely felt across Silicon Valley. WANdisco has scaled some significant heights since its 2005 beginnings.

The software company, which is headquartered in San Ramon, California, and Sheffield, United Kingdom, employs more than 180 people. Its customers include Google and Amazon.

One manifestation of its rise is its partnership with IBM. In April 2016, the two companies signed an agreement to allow IBM to become an original equipment manufacturer (OEM) for WANdisco Fusion. The deal allows IBM to rebrand Fusion as "IBM Big Replicate" and plays an important role in IBM's big data and cloud computing strategy - including the movement of data between on-premises software and the cloud.

The company's recent internal investigation has found that its previously published purchase orders and sales bookings for 2022 were falsified.

Then barely a month after the initial revelations came the resignations of two senior figures in Richards and Miller.

South Yorkshire police and the San Francisco police department have said they have not yet had any reports from WANdisco relating to fraud. WANdisco and the London Stock Exchange declined to comment on whether police were involved in the investigation. The Serious Fraud Office said it could neither confirm nor deny whether it was investigating the incident.

Commenting on these latest revelations uncovering the scale of the potential fraud, Mark Hastings, partner at Quillon Law, commented that the situation "bears all the hallmarks of a classic corporate fraud, manipulating WANdisco's financial position and misleading shareholders and investors."

Hastings specialises in complex civil law matters and has two decades of litigation experience in this area.

Reacting to news of the board-level resignations, Hastings continued: "It appears that WANdisco represents yet another example of large-scale fraud in the technology sector. Whilst FRP's investigation may be at an early stage, it is certain that the consequences for the company are going to be much more extensive than the departure of two executives."

Talking to the Financial Times about the resignations, George O'Connor, a technology analyst at Goodbody said: "There is a strong message (in the announcement) that they are not to blame but this has happened in their tenure."

He continued: "Investor confidence will have been shattered and they've left as part of that."

Providing an update on proceedings, the company said that findings by FRP Advisory, the independent body hired to lead the investigation, "continued to support" the view that a single senior sales employee is responsible for the "irregularities."

WANdisco announced a series of significant deals in 2022 with unidentified customers. As a result, its share price rose 215 per cent from January 2022, until the suspension of trading in early March 2023. On the back of this ascent, the company was valued at £890 million at its peak a month ago - just when it made the shock announcement of share suspension.

Also in March, the company announced its intention to list in New York, becoming the latest UK firm intending to list in the United States.

Instead, there has been quite a reversal of fortune for this once-rising star. Despite the company's public reassurances that it sees "long-term growth and success" in the days ahead as it ushers in new leadership, the future of WANdisco looks murky, to say the least.

Hastings concluded by saying: "Due to the scale of the discrepancy between WANdisco's financial reporting and its true results, it is very likely that we will see litigation arise from these findings. Future legal actions may include claims against the company, its auditors and any individuals found to have been involved in the fraud and there will likely be close scrutiny on profits, secret or otherwise, which may have resulted from the fraudulent bookings and purchase orders."