Aditya Raj Sharma Indicted for $10 million Investment Fraud

On January 12, 2024, the U.S. Attorney’s Office for the District of Minnesota announced Aditya Raj Sharma of Maple Grove, Minnesota, had been indicted for defrauding investors and financial institutions out of more than $10 million.

According to court documents, Aditya Raj Sharma, 50, was the founder, CEO, and president of Crosscode Inc., a cloud-based software development company headquartered first in Maple Grove and later in Foster City, California. From Crosscode’s founding in 2015 through at least May 2019, Sharma was the primary operator of the company, its controlling shareholder, and, at times, its only employee and shareholder.

According to court documents, from 2017 through at least 2019, Sharma knowingly and intentionally devised and executed a scheme to defraud investors, financial institutions, and lending and finance companies. Sharma manipulated and falsely inflated Crosscode’s financial records to induce private investors and financial entities to extend capital to his company in order to avoid or delay financial hardship for Crosscode, which was mired in debt with virtually no incoming revenue or cash-on-hand.

According to court documents, Sharma fraudulently applied for hundreds of thousands in funding from multiple lenders and finance companies as part of his multi-year scheme. In total, Sharma induced at least one financial institution to provide him with a $950,000 line of credit and further induced at least 150 investors, including Minnesotans, to provide approximately $9.25 million to Crosscode.

As a further part of the scheme, in early 2019, at a time when Crosscode was struggling financially and had little or no revenue, Sharma distributed and caused to be distributed a private placement memorandum to prospective investors that contained materially false and fraudulent statements regarding Crosscode’s cash-on-hand and receivables. Based on this fraudulent private placement memorandum, Sharma raised approximately $9.25 million in gross proceeds from victimized investors through the issuance of 3.7 million shares of preferred Series A stock for Crosscode.  Sharma used victims’ proceeds from the stock sales, in part, to pay off existing loans and debts, which Sharma previously obtained as a result of his scheme to defraud. 

The indictment charges Sharma with four counts of wire fraud and two counts of bank fraud. Sharma made his initial appearance on January 11, 2024, in the U.S. District Court before Magistrate Judge Dulce J. Foster.

A review of publicly available information shows that Aditya Raj Sharma was terminated by Crosscode on November 13, 2019. Despite this, Sharma allegedly carried out a series of additional frauds under the Crosscode name. 

For starters, a complaint was filed by Crosscode against Sharma on January 1, 2020, in the United States District Court for the Northern District of California, alleging that Sharma was making false statements to Crosscode shareholders and third parties that he had a purported intellectual property license agreement with Crosscode granting him ownership of essentially all of the company’s intellectual property and had, among other things, the right to terminate the company’s purported exclusive license to use such intellectual property. That case was dismissed after Crosscode filed for Bankruptcy on May 5, 2020. 

Then, according to an indictment filed against Sharma in the United States District Court of Minnesota on November 10, 2020, Sharma also made false statements involving Crosscode after his termination in order to fraudulently obtain a Paycheck Protection Program (“PPP”) loan through the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was enacted by the federal government in March 2020.

According to that Indictment, Sharma created a new entity named Kloudgaze Inc. on May 18, 2020, which claimed to design cloud-computing technology (like Crosscode), then used Kloudgaze Inc. to apply for a PPP loan by submitting bogus information.

The indictment alleged that Sharma falsely stated that:

• Crosscode dba Kloudgaze was in operation on February 15, 2020, despite the fact that Sharma did not create Kloudgaze until on or about May 18, 2020, and the fact that Crosscode never did business as Kloudgaze.
• He was the 100% owner and “CEO” of Crosscode, despite the fact that Sharma was terminated by Crosscode on November 13, 2019, and no longer had any ownership in the company.
• The average monthly payroll of Crosscode dba Kloudgaze was $225,000 and the company had approximately 29 employees.

Sharma also falsified bank account records in support of his PPP application.

Based on the false information provided, Sharma managed to secure a $562,500 PPP loan. Then, according to the Indictment, Sharma transferred the money to his personal bank account to use for his own personal spending, including spending $76,300 for legal services, $5,000 for a downpayment toward the installation of a $64,300 pool at his personal residence and transferring $14,000 to a financial account in India. 

Sharma pleaded guilty to the count of wire fraud in the case and was sentenced to 60 months in prison on May 9, 2022, followed by 2 years of supervised release, and ordered to pay $1,773,600.00 in restitution. Sharma appealed the sentencing and recently lost his appeal. Sharma is now facing additional prison time with the new charges against him.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

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