Corporate Law

In business for a decade, global Wi-Fi venture once valued at $2B got financing based on fake work

For nearly a decade, a Spanish company known as Let’s Gowex SA claimed to be making a profit by offering public wi-fi in cities throughout the world.

But that wasn’t true, entrepreneur Jenaro Garcia Martin, who heads the company, told Spain’s High Court last month. He and others familiar with Gowex said Garcia Martin fooled investors, regulators and his own workers with a network of shell companies and contracts for fake business, using the imaginary work as a basis to obtain real financing and even paying taxes the company didn’t owe on money it hadn’t made so it would appear to be profitable, reports Reuters.

Now facing charges that he committed financial crimes, including false accounting, the 46-year-old isn’t required by his home country’s justice system to enter a plea.

He told the court he initially began falsifying to try to keep the company together while dealing with a lawsuit over unpaid bills and hoped to make it truly profitable within a few years. Although the claims that fictitious contracts were, in fact, real made Gomex stand out as unusually successful while other Spanish companies struggled in a difficult economy, it was an activist U.S. investor rather than regulatory officials who eventually blew the whistle, Reuters reports.

On July 1, Gotham City Research LLC announced that Gowex had falsified its accounts and suggested its stock was worth little or nothing. Garcia Martin initially promised a lawsuit and an accounting would contradict the Gotham City claims and tried to get more financing. But by July 4 the company’s accounts were frozen and it is now in bankruptcy, the news agency recounts. At one point, Gowex supposedly had a value of some $2 billion.

Nonetheless, Garcia Martin remains optimistic about his future success as a global entrepreneur, even after being told by the judge in his case that he could be imprisoned for years.

“I know I have to pay for it in prison and I seek no clemency,” he told Reuters last month. “I continue to be the master of my destiny and for this my priority is to repair this damage and this is my next great project.”

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