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Summary:

The Spanish firm filed for bankruptcy protection after due diligence-focused investment outfit Gotham City Research exposed phoney revenues and inflated hotspot claims.

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The Spanish Wi-Fi provider Gowex has filed for bankruptcy protection after admitting that it falsified its accounts for the last 4 years. CEO Jenaro García Martin has resigned.

All this follows a July 1 report by Gotham City Research, which said Gowex’s real revenue was 10 percent (or less) of what the company was reporting. What’s more, when Gowex claimed it had more than 100,000 hotspots in its free public Wi-Fi empire … actually it had around 5,000.

“90% of Telecom revenue originated from undisclosed related parties, tied to GOW CFO & an early investor,” Gotham wrote. “We have evidence Gowex’s largest customer was really itself.” The head of investor relations, who signed off on annual reports, was the CEO’s wife.

On Sunday Gowex announced that Martin was taking responsibility for the false accounting. Gotham responded by saying this was fortunate, “saving us all a great deal of time.”

Gowex staff issued a statement on Monday saying they were in “a state of complete shock” and “concerned about the customers affected and the damage to our image as professionals.” They disassociated themselves from the false accounting and said they were considering taking legal action as victims.

“Workers still continue in our work posts, to keep providing service and to bring the company forward, despite the circumstances,” they said.

According to IT Pro, some local authorities in the U.K. whose free public Wi-Fi was being supplied by Gowex have said they will keep the services going.

The New York City Economic Development Corporation (NYCEDC), which partnered with Gowex to provide “wireless corridors” across the 5 boroughs, told me it was committed to bringing wireless access to all parts of the city, but it was presently unclear whether Gowex would continue to run its corridors. Gowex had also announced network rollouts in San Francisco, Buenos Aires, Paris and Madrid.

This article was updated at 11.30pm PT to note a response from NYCEDC.