New companies seeking investment and funding are under a lot of pressure to show success. One such company is facing an investigation by the Securities and Exchange Commission (SEC) to see if it tried to boost its sales numbers by hiring contractors to buy their product then reimburse them for the purchases.
The SEC is looking into San Francisco based Hampton Creek, Inc., according to Bloomberg, which broke the story about the potentially bogus sales numbers in order to impress potential investors. The agency is trying to determine if the startup broke federal law by failing to disclose it was buying its own vegan mayonnaise from stores, making it appear to be more successful than it actually was, according Bloomberg’s sources.
At issue is whether company founder and CEO Joshua Tetrick improperly recognized revenue from purchases made with company money. Bloomberg reported Hampton Creek started an operation to purchase its own mayonnaise starting as early as 2014. The SEC has jurisdiction over the closely held company because it has raised money from outside investors.
Investors have come up with more than $220 million for Hampton Creek and Tetrick told employees in August he expects to raise another round of financing by September that will increase the value of the company to $1.1 billion, according to Bloomberg.