India’s rapidly growing start-up ecosystem has been rocked by a series of high-profile frauds that lay bare the dangerous mix of unchecked valuations, compromised accounting practices, and corruption in government-backed funding schemes. With auditors failing to flag irregularities and selection committees swayed by influence rather than merit, it’s time for systemic reforms and real accountability.
The Illusion of Growth: Hyped Valuations and Fraudulent Financial Practices
Over the last decade, India has celebrated its rise as a global start-up hub, home to over 100 unicorns and countless promising ventures. But this growth narrative has been repeatedly marred by revelations of fraudulent financial reporting, inflated valuations, and abuse of investor trust.
Behind many of these frauds is a troubling trend: accounting professionals and auditors failing to perform due diligence or, in some cases, allegedly colluding to mask the misuse of funds. In the race to achieve unicorn status or secure the next funding round, basic financial discipline has often been sacrificed.
Notable Cases:
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GoMechanic (2023): The automobile servicing startup admitted to financial reporting fraud, including inflating revenue figures by nearly 60%. The founders acknowledged these discrepancies just before a major funding round collapsed.
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BharatPe (2022): An internal audit exposed irregularities linked to co-founder Ashneer Grover, including fake vendor payments and misuse of corporate funds. The case raised serious concerns about the role of internal auditors and board-level oversight.
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Zilingo (2022): The fashion-tech platform suspended its CEO Ankiti Bose following questions about financial integrity during due diligence. The company’s valuation once soared to $1 billion without transparent financial scrutiny.
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Vauld (2022): This crypto platform halted operations and froze withdrawals amid accusations of mismanagement and financial instability, affecting thousands of users.
These examples show how hyped valuations and financial opacity have flourished due to lax accounting oversight and limited regulatory action.
Corruption in Research Grants and Public Funding: A Broken System
While private sector frauds grab headlines, a quieter, equally alarming crisis is unfolding in publicly funded start-ups. Multiple investigations have flagged misuse of government grants awarded through agencies like BIRAC, DST, MeitY, and various state start-up missions.
Instead of promoting genuine innovation, these grants are often diverted or misused, with funding going to shell companies, fake consultants, or inflated equipment purchases. Audits have revealed that many such ventures either existed only on paper or diverted funds for personal use.
Common Patterns of Misuse:
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Projects selected not on merit but via references or proximity to evaluation committee members
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Founders colluding with corrupt officials to win grants
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Use of ghost employees, fake invoices, and phantom vendors
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No follow-up or post-funding accountability mechanisms
Such grant frauds not only drain public resources but also undermine trust in government-backed innovation ecosystems.
Weak Oversight of Accounting Professionals: Time for a Reckoning
Despite their central role, accounting professionals face minimal consequences when startup frauds are uncovered. In many cases, Chartered Accountants (CAs) and auditing firms either fail to raise alarms or sign off on manipulated books — enabling founders to secure funding or grants based on falsified financial data.
India’s current framework offers limited enforcement under ICAI (Institute of Chartered Accountants of India), and most disciplinary actions are slow, non-transparent, or merely symbolic.
What Needs Urgent Reform:
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Mandatory forensic audits for startups receiving public funds or VC investments above a threshold
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Real-time monitoring of grant utilization with third-party verification
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Audit accountability laws with punitive action for negligence or collusion
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Transparent, merit-based grant selection processes, insulated from political or bureaucratic influence
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An independent watchdog body to oversee grant disbursals and probe fund misuse
While India continues to foster a dynamic and ambitious start-up culture, it can no longer afford to overlook the growing credibility crisis. The start-up story cannot be built on manipulated numbers, compromised audits, and corrupt grant ecosystems. It’s time for a hard reset — one that enforces financial discipline, punishes misconduct, and ensures public funds support genuine innovation.
Until such steps are taken, every new fraud case will be less of a surprise and more of a systemic symptom.