The founder of a Winnipeg-based technology company has been arrested and charged in California for wire fraud, allegedly duping investors for roughly US$120 million.
A criminal complaint claims Matthew Derrick Hudson circulated false financial documents to drum up support for Invenia Technical Computing Corp., his business using machine learning to analyze electricity markets.
The U.S. Attorney’s Office, Northern District of California unsealed the complaint on Sept. 24.
WAYNE GLOWACKI / FREE PRESS FILES
Matthew Hudson and co-founders launched Invenia in Winnipeg 19 years ago.
Hudson also faces civil action from the U.S. Securities and Exchange Commission. The SEC alleges Hudson violated securities laws.
The allegations — which haven’t been proven in court — are the latest in a string of dramas at Invenia.
Hudson and co-founders launched the company in Winnipeg 19 years ago. Invenia touted itself as a greater way to predict next-day electricity usage via its computer modelling. Such modelling, it advertised, helped hone energy use and prevent waste.
The company delved into trading and investing in next-day markets, largely in the United States. It staffed roughly 20 people in Winnipeg and another 10 in Cambridge, England, by mid-2017.
Fraud occurred during two funding rounds spanning 2020 through 2022, the SEC alleges in its 17-page complaint.
Per the document, outside investors put approximately US$86.2 million into Invenia between October 2020 and March 2021. Another US$33.5 million came by January 2022.
During this time, Hudson allegedly made “materially false and misleading statements” to investors. A falsified 2019 audited financial statement placed Invenia’s annual gross revenue around US$227 million, an approximate 1,035 per cent inflation from the actual US$20 million, the SEC complaint reads.
The same statement turned Invenia’s net loss of nearly US$10 million into a positive net income of roughly US$114 million, the complaint continues.
Fake emails and falsified invoices added to the scheme, per the complaint.
It highlights two San Francisco-based investors during the first funding round in question. One of two second-round investors is a San Francisco resident, the SEC states. (It says the first round had five American investors total.)
Hudson — then-chief executive of Invenia and effectively its acting chief financial officer — was also sending inflated financial results to fellow board members, the SEC claims.
A shake-up came when an investor contacted Invenia’s board about the second round of funding, per the SEC.
“Hudson knowingly or recklessly fabricated virtually everything about the (second) funding round, which was never authorized by Invenia’s board,” the complaint says.
The board formed a special committee in April 2022 and learned of the misleading financials. Both second-round investors were reimbursed by August 2022 at Hudson’s direction, the SEC says. The first-round investors haven’t seen their money, it alleges.
The board terminated Hudson in October 2022. Two months later, Bloomberg reported Tribe Capital — a venture capital investor — was reducing its valuation in Invenia by 95 per cent, citing inflated financials and other irregularities.
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Invenia’s roughly 75 staff, spread in Winnipeg and Cambridge were laid off in early 2023, the Free Press previously reported. Invenia’s board placed the company in bankruptcy earlier this year.
Meanwhile, Hudson has been released on bond pending trial. He’s scheduled to appear in U.S. federal court on Nov. 17. The Free Press contacted Hudson on Monday morning and didn’t hear back by end of day.
If convicted, Hudson faces a maximum sentence of 20 years in prison and a fine of US$250,000 plus restitution, the U.S. Attorney’s Office outlined.
The SEC seeks permanent injunctions including a conduct-based injunction, disgorgement plus prejudgment interest, civil penalties, and an officer-and-director bar.
gabrielle.piche@winnipegfreepress.com
Gabrielle Piché reports on business for the Free Press. She interned at the Free Press and worked for its sister outlet, Canstar Community News, before entering the business beat in 2021. Read more about Gabrielle.
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