Mike Lynch uses $50 million in Darktrace stock to secure US bail

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Mike Lynch, the billionaire founder of UK software group Autonomy, has used about $50 million worth of shares in UK cybersecurity group Darktrace to post his bail as he awaits trial for fraud in the US.

The British entrepreneur, who was extradited to the United States earlier this month, has posted approximately 14.6 million shares in Darktrace. That amount makes up about half of his stake and is now frozen by the US court, according to court documents seen by the Financial Times. He also used about $15 million in cash as part of the bail deal.

Lynch faces criminal trial in California on 17 charges, including conspiracy to commit wire fraud and securities fraud linked to $11 billion acquisition of Autonomy by Hewlett Packard Enterprise in 2011. He faces a maximum of 25 years in prison if found guilty of all charges. Lynch has always denied any wrongdoing and has pleaded not guilty.

Darktrace has struggled for years to extricate itself from ties to both Lynch and Autonomy, which have weighed on investor sentiment in the British start-up.

A number of hedge funds accused the cybersecurity group of implementing Autonomy-like sales tactics, even though Darktrace he denied any wrongdoing in its accounting practices.

Darktrace CEO Poppy Gustafsson was previously corporate controller of Autonomy and helped create Darktrace using funds in part from Lynch.

The criminal case facing Lynch centers on allegations that the software group’s accounts were manipulated to flatter his book, leading HP to pay an extra $5 billion when it acquired Autonomy in 2011. The former chief financial officer of Autonomy Sushovan Hussain was convicted in the US in 2018 and is serving five years in prison.

After nearly four years of fighting extradition in British courts, Lynch lost his last appeal in April, arriving in California in early May on a commercial flight accompanied by US marshals.

A California judge ordered Lynch to post $100 million bail secured by $50 million in cash or stock following a hearing shortly after his arrival in San Francisco. Lynch is currently under house arrest in California under 24-hour surveillance.

A spokesperson for Darktrace said: “Dr. Lynch has no operational, advisory or other role at Darktrace. His relationship with Darktrace is purely limited to his participation in the business. These are publicly traded shares and his decisions on how to use his stake remain with him ”.

The 14.6 million shares Lynch used as part of his bail, first reported by The Telegraph, make up about half of his 4.5% stake in the company, worth about $95 million .

Lynch’s wife, Angela Bacares, owns about 6.5% of the company’s shares, worth about $136 million, but has been gradually selling about half of her stake since late 2021.

The shares will be held by the US court until the conclusion of the court case.

Lynch’s rep did not respond to a request for comment.