Bellevue, WA-based Finsphere has added $7.3 million in fundraising and a board member from Vodafone Ventures, according to a new SEC filing. The new money, which appears to include the sale and exercise of some options, adds to a total of $3.95 million that Finsphere raised in related equity financings last year.

Finsphere, founded in 2007, is headed by veterans of the wireless and finance industries. It offers software and data analysis services that use consumer mobile phones for identity verification, with an emphasis on helping banks and other financial providers track fraud and identity theft. Finsphere also offers a slimmed-down version of its financial-fraud protections for consumers, called Pinpoint.

The apparent investment from Vodafone Ventures is significant—it’s the venture arm of Vodafone, a huge U.K.-based mobile operator. The new Finsphere board member is Vodafone Ventures director Tobin Ireland, a tech-industry veteran whose previous work includes a stint as chief marketing officer at AOL.

This latest chunk of money brings Finsphere’s venture investment total to about $30 million. Previous investors are Bezos Expeditions, Frazier Technology Ventures, Mohr Davidow Ventures, and Shasta Ventures. I’ve e-mailed Finsphere for comment on the latest SEC filing and will update if I hear more.

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Los Altos, CA-based Guardian Analytics, which uses behavioral analytics software to detect online bank fraud, said today it had closed an $11 million in Series D financing. Split Rock Partners joined as a new investor, and existing investors Foundation Capital and Sutter Hill Venture returned for the round. The company said it would use the funds to “rapidly advance the company’s direct and channel sales efforts and to further enhance its proven product lines with expanded risk analytics and solutions to address the growing problem of fraud in financial institutions.”

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Mountain View, CA-based Victrio, which helps companies reduce telephone credit-card fraud by comparing callers’ voices to a database of known fraudsters’ voiceprints, has raised $5 million in new equity-based financing, according to a regulatory filing. The investors aren’t identified, but the filing lists U.S. Venture Partners principal Rick Lewis and individual investor Steve Tran as board members.

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Los Altos, CA-based ThreatMetrix, which helps online businesses prevent fraud by authenticating the hardware devices people use to log in to e-commerce sites and other services, today announced the closing of a $12.1 million Series C funding round. Tenaya Capital (formerly Lehman Brothers Ventures) led the round, which also included existing investors U.S. Venture Partners, CM Capital, and TVP. ThreatMetrix CEO Reed Taussig said the new funds would go toward “general operating capital, expansion of our product offering, and sales and marketing.”

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Seattle-based MOD Systems, a developer of digital-media delivery systems, has had a rocky couple of years, but now it has found a new lifeline in the form of a $6 million investment.

The company, which develops technologies that allow consumers to purchase digital movies, TV shows, and music, and load them onto SD cards portably through touch-screen kiosks, raised an impressive $35 million Series A in September 2008, led by Toshiba, NCR, Deluxe Entertainment Services, and private investors. But the company drew less glowing attention after its co-founder and then CEO Mark E. Phillips was sued by an investor for fraud, embezzlement, misrepresentation, and breach of fiduciary duty in February 2009.

However, despite the public and drawn-out case—resulting in Phillips being charged in a federal wire fraud case in March—the company has found a way to regain confidence of investors, through a $6 million Series B round being announced today.

“When we raised money two years ago, the purpose of that money was to do what we’re doing now—relaunch the company and implement the technology we’re doing now,” says MOD co-founder, chairman, and chief executive Anthony Bay.

The new round of financing is being used to deploy the company’s digital entertainment download kiosks in the market. MOD’s first commercial customer, InMotion Entertainment, rolled out around 20 of the 57 kiosks it will deploy at InMotion stores in airports nationwide—including SeaTac International Airport, which was the first to host a kiosk—two months ago. Bay says the company expects to install the rest before the end of the year.

MOD chose airports as the first locations to host kiosks because of the large market for travelers who are looking for entertainment while they’re traveling by plane. Through one of these kiosk systems, consumers will be able to browse, rent, or purchase digital movies and TV shows, and load them onto an SD card (or purchase one on the spot) before boarding a flight.

“This is the first real commercial deployment of major studio content through kiosks,” Bay says. “With movies and television shows, the studios are very, very picky about content protection. SD cards are the only format that allow you to protect the content on the card—SD cards are standard secured digital. Using SD cards, we can protect the movie or the TV show, and then essentially either make it permanent use so you can keep it, or you can rent it, so you have 48 hours to watch it.” This capability means the studios don’t have to worry about content protection, and consumers still have the ability to watch a movie or TV show streaming right from their computer, without an Internet connection.

“There’s a lot of buzz about the world moving to digital content distribution. Most companies are focused on content delivery system to the home. MOD is focused on content delivery outside … Next Page »

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San Diego authorities have charged a 59-year-old man with identity theft, saying he unlawfully transferred $7.5 million from a Deutsche Bank account by posing as the actual account holder—a retired San Diego biotech executive and angel investor who was found dead on June 8.

San Diego police also are investigating the death of the executive, John G. Watson, as a possible homicide. Watson, who was 65, was a board member at the San Diego Tech Coast Angels and active with Connect, the San Diego nonprofit program for technology and entrepreneurship.

Police arrested Kent Keigwin, 59, on June 11 after he showed up at Watson’s residential unit on Camino Del Oro in La Jolla, according to Deputy District Attorney Sharla Evert. Police investigators, who were in Watson’s home searching for evidence, already knew that someone posing as Watson had transferred $7.5 million to a Scottrade account that was opened in Watson’s name, Evert says.

Keigwin had been representing himself as a financial advisor to the “entrepreneur and investor community” in San Diego, Evert says. Keigwin pleaded innocent to identity theft and related felony fraud charges at a June 15 arraignment. His bail was set at $2.5 million, and Evert says he remains in jail.

Police homicide Lt. Kevin Rooney told me yesterday that investigators are awaiting a formal determination on the cause of Watson’s death by the San Diego County Medical Examiner.

As I reported last week, Watson’s body was found on the floor of his bedroom on the evening of June 8 after he failed to appear for the San Diego Tech Coast Angels’ regular board meeting and dinner event at the UC San Diego faculty club. Watson was expected to serve as the event’s master of ceremonies and fellow board members, who were alarmed and concerned by his absence, found his body. It was unknown how long he had been dead, but TCA members told me Watson had not responded to e-mails sent days before the event.

Evert says the new account in Watson’s name appears to have been opened the previous day, on June 7.

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San Diego police have launched a homicide investigation into the death of John G. Watson, a retired biotech executive and board member of the San Diego Tech Coast Angels, according to members of the startup investment group who were close to Watson.

Watson’s body was found in the bedroom of his La Jolla Apartment on June 8th when he failed to appear for a regular TCA board meeting and dinner event at the UC San Diego faculty club, said Steve Flaim, who is current president of the TCA’s San Diego chapter. Flaim says he notified TCA members by e-mail yesterday that Watson’s death “appeared suspicious” to San Diego police and that Watson also “was the subject of fraud and embezzlement.” Flaim says his e-mail prompted Frank Peters, a TCA member in Orange County, to report that Watson had been murdered in an item published on his website yesterday.

San Diego police have made an arrest, Flaim told me, although I was unable to confirm that with the police last night, and it isn’t clear whether the arrest is related to the fraud or murder investigation—or both.

“We’re all angry and shocked and upset that something like this could happen to one of us,” Flaim said in a phone call last night. He described Watson, who was 65, as “a happy bachelor” who had retired in La Jolla, and was active with Connect, San Diego’s nonprofit group for technology and entrepreneurship, and as an angel investor.

Two TCA members found Watson’s body on the floor of his bedroom 11 days ago, Flaim said. Watson had missed the group’s afternoon board meeting, and was expected to serve as master of ceremonies during the dinner event, which included presentations by several entrepreneurs. Watson also had failed to respond for several days before the event to e-mails from … Next Page »

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Xenomics, a New York-based developer of molecular diagnostic technologies, says it has filed a suit in New York state court alleging that San Diego’s Sequenom fraudulently misrepresented the status of its prenatal Down syndrome test. Xenomics alleges the fraud induced them to exclusively license valuable patent rights to Sequenom.

According to a licensing agreement announced last October, Xenomics granted Sequenom (NASDAQ: SQMN) a worldwide license to its patents for development of prenatal and diagnostic products in return for an upfront payment of $1 million and royalties on sales. Xenomics also granted Sequenom negotiation rights to use its patents in cancer-related products. Xenomics, which trades on the pink sheets under the symbol XNOM.PNK, says is seeking compensatory and punitive damages not to exceed $300 million, and the termination of the license between the companies. A Sequenom representative declined to comment on the litigation.

The suit adds to the mounting problems facing Sequenom, which stunned investors last April 29 with an announcement that the launch of the prenatal Down syndrome test would be delayed because scientific data had been mishandled. The company’s shares lost 76 percent of their value in trading the next day and have drifted downward since. The disclosure was a shock because just six days earlier – on April 23 – the company said the Down syndrome test was on track for a June launch. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. In addition, the SEC told Sequenom it wants information on another matter: Sequenom’s offer to acquire Exact Sciences in January 2009. Sequenom dropped a hostile bid for the Marlborough, MA-based company after Exact Sciences, acting to save itself, sold some assets to Genzyme. Sequenom has said it is cooperating with authorities.

Last month, Sequenom ousted CEO Harry Stylli and R&D senior vice president Elizabeth Dragon after an internal investigation. CFO Paul Hawran resigned, as did another officer who wasn’t identified. Three employees also were terminated. Each of the officers has denied wrongdoing. The company still has not given an accounting of what happened.

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Bellevue, WA-based Finsphere, a security and authentication startup, has closed $9 million in equity funding, according to a regulatory filing. The investors were not disclosed, but the form lists Paul Bialek of Frazier Technology Ventures, William Ericson of Mohr Davidow Ventures, and Ravi Mohan of Shasta Ventures as directors. Finsphere is trying to help banks and their customers fight identity fraud.

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San Diego-based ID Analytics is launching a free online test that measures the vulnerability of individual consumers to identity theft.  The test, called My ID Score, makes use of the same huge database and analytical software technology that ID Analytics uses to rank the probability that credit card purchases and other transactions are authentic.

The free online service, which the company is announcing today, enables a consumer to quickly get a ranking of just how exposed he or she may be to identity theft. “You can immediately assess the risk of someone else posing as you,” says ID Analytics Chief Marketing Officer Larry McIntosh. My ID Score is the first public test to use the company’s state-of-the-art technology created to prevent a fraudster from usurping someone else’s personal information and credit to make fraudulent purchases.

My ID Score is a three-digit number, a statistical score, between 1 and 999. The higher the number you get, the bigger the risk of becoming a victim of identity theft. Behind the calculation is the company’s network of billions of identity elements. Only approximately two percent of Americans belong to the moderate risk group, but ID theft is nevertheless a great concern. According to a recent survey, the thought of someone stealing their Social Security Number (SSN) concerns people more than getting their laptop or wallet stolen.

Anyone with SSN and credit history can get a My ID Score from the web page. It’s like an online credit application where you need to insert your name, addresses, date of birth and SSN. The network knows if a fraudulent credit card application or consumer transaction is linked to your personal information. My ID Score recognizes you after few additional questions and gives you a score. Since I’m a citizen of Finland without a U.S. credit history, I used my Xconomy colleague Bruce Bigelow as a guinea pig. He scored 52, which means low-risk.

For someone who receives a high-risk score, the website may recommend contacting the San Diego-based Identity Theft Resource Center, a nonprofit organization that provides assistance to victims of identity theft. The center can help consumers take such steps as freezing their credit cards.

ID Analytics’ McIntosh says the test is not intended to replace other necessary security measures that consumers should be doing, such as monitoring their bank accounts and regularly reviewing their credit reports. Still, he expects the site will reveal many identity thefts. “We want to help consumers help themselves. The victims of identity theft will benefit, and it will benefit our client organizations, too,” he says.

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Seattle-based MOD Systems, a maker of music and video downloading technology for retail stores, placed its chief executive, Mark Phillips, and chief operating officer, Kenneth Gordon, on administrative leave Friday. I heard a rumor about this move over the weekend, and TechFlash confirmed the news yesterday, adding some important details. A phone message left with a MOD Systems spokesperson has not been returned.

The move comes on the heels of a lawsuit filed by MOD investor Robert Arnold in February against Phillips, Gordon, and MOD vice chairman Anthony Bay, alleging blatant misuse of funds, embezzlement, and misrepresentation. Bay is now the acting CEO of MOD Systems, according to TechFlash. Phillips and Gordon remain employed by the company, which isn’t giving any reasons for the latest move.

MOD Systems was co-founded by Phillips and Bay in 2005. Last September, the firm scored a $35 million equity investment from Toshiba, NCR, and others. The money was supposed to be used to develop MOD’s media software for use with touch-screen kiosks and secure digital memory cards. In the meantime, the company has been demonstrating its product at IT shows, and Bay is still scheduled to speak on May 7 at the Digital Hollywood conference in Santa Monica, CA.

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Seattle-based MOD Systems and three of its top executives are being sued by investor Robert Arnold for fraud, embezzlement, misrepresentation, and breach of fiduciary duty, among other complaints. That’s according to a lawsuit filed in King County superior court last Wednesday. Arnold’s investigation into the company was first reported by TechFlash.

In the suit, MOD Systems’ co-founder and CEO Mark Phillips is accused of using corporate funds for his personal benefit—including the purchase of a vehicle, travel and entertainment, and rent for his personal residence. Phillips is also accused of misrepresenting the digital-media-delivery company’s intellectual property to Arnold, who reportedly invested $3 million in the company. Arnold is a prominent philanthropist who donated $15 million to the Fred Hutchinson Cancer Research Center in 2005, and previously invested in Starbucks and other companies.

The lawsuit also names MOD’s co-founder and vice chairman, Anthony Bay, and chief operating officer Kenneth Gordon as defendants. In response, MOD’s chief financial officer Richard Barber said in a statement, “The company believes that the claims Mr. Arnold is asserting against MOD Systems itself are unfounded and without merit.”

Last September, the company received a $35 million strategic investment from Toshiba, NCR, and others. That deal figures prominently in some of the suit’s specific allegations. For instance, Arnold claims the deal gave Toshiba the power to use MOD’s intellectual property for its own interests, and that Phillips and Bay were given special treatment, such as the right of first refusal to buy preferred shares—and because of these “conflicts,” the suit says, Arnold’s approval was required by law for the transaction to proceed. Arnold owned 7.8 percent of MOD, and was the largest shareholder entitled to vote on the transaction. (He did not give approval.)

MOD Systems, which was founded in 2005, makes music and video downloading technology for touch-screen kiosks. Just last month, MOD signed deals with Warner Bros. and Paramount Digital Entertainment to allow retail stores to distribute videos by having customers download content to secure digital cards. MOD is also involved in another lawsuit with the former head of Warner Home Video, Warren Lieberfarb, who claims MOD owes him unpaid consulting fees.

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Seattle-based Entellium’s former CFO, Parrish Jones, pled guilty to one count of wire fraud in U.S. District Court today, as reported by the Seattle Times and TechFlash. Jones faces 33 to 41 months in prison for his alleged role in falsifying company revenues. Last week, Entellium’s former CEO Paul Johnston also pled guilty to fraud, and could face four to five years in prison. Both men will be sentenced on March 13.

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Stephen Gardner, the former CEO of San Diego’s scandal-ridden enterprise software giant Peregrine Systems, was sentenced yesterday to eight years in prison for helping inflate Peregrine’s revenue. The San Diego Union-Tribune reported that Gardner told a federal judge in San Diego yesterday, “I did hide problems in the hope that they would be fixed and we could move on.” Gardner was among 18 people charged with participating in a scheme that systematically overstated revenue from 1999 to 2001. Peregrine collapsed in early 2002 and later filed for bankruptcy.

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Seattle-based Entellium said it has filed for bankruptcy protection today, as it prepares to sell off its assets. In October, the software company’s top two executives, Paul Johnston and Parrish Jones, resigned and were charged with fraud. The filing says Entellium has $37.7 million in assets and $12.7 million in liabilities. Its creditors are listed as Ignition Partners, WestRiver Capital, Malaysia Venture Capital Management, Middlefield Ventures, Sigma Partners, and Silicon Valley Bank. Financial software firm Intuit, based in California, has made an offer to buy Entellium’s assets.

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Intuit, a financial software firm based in Mountain View, CA, has made an offer to buy the assets of Seattle startup Entellium, according to TechFlash. The report cites an interview with Entellium spokesperson Diane Carlini, as well as an anonymous source who puts the purchase price at about $8 million. Entellium, which was backed by Ignition Partners, Intel Capital, and other venture firms, has been rocked in the past two months by the arrests of two of its top executives on wire fraud charges.

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Already you are probably asking yourself, “What the heck is predictive analytics?”

It encompasses a variety of disciplines and technologies, typically using software that applies advanced mathematics or statistics to analyze pools of data and make forecasts about current or future events.

Who would have predicted that San Diego would emerge as one of the global capitals in such technology?

The forecasts that predictive analytics offer are usually expressed in terms of the percentage or odds for or against a particular outcome—such as the likelihood that a particular credit card transaction is fraudulent. The technology also can be used to analyze data, such as traffic through a freeway interchange or visitors to a website, and identify key “predictors”—the factors that would help improve traffic flow or eliminate recurring accidents.

Predictive analytics are increasingly all around us, says Bob Slapin of the San Diego Software Industry Council. “Every transaction, every phone call, every mouse click is now a data point,” Slapin says. “We’re gathering information faster than we can process it, and that requires sophisticated technology. It requires analytics.”

Today, Slapin says, “If you’re in software or software as a service, you need analytics because you’re gathering all this online data about your customers.”

Qualcomm, Websense and Intuit’s San Diego-based consumer tax group are among those that specialize in such Web analytics, Slapin says.

Local defense contractors such as SAIC and L3 Communications are using analytical software to help identify terrorists. San Diego-based Kuity Corp. searches Medicare records for telltale signs of Medicare fraud and Detectent mines electric utility records in search of customers with illegal hookups to the power grid.

Slapin says his group has organized a forum on analytics, which is being held today at the Del Mar Marriott, to highlight the importance of analytics and to showcase San Diego’s leadership in the field.

Slapin attributes San Diego’s prominence in software analytics to UC San Diego’s Robert Hecht-Nielsen, who specializes in neural networks and pattern recognition software. Hecht-Nielsen founded HNC Software in 1986, initially to work on enhancing military target identification for the Department of Defense, but the company later adapted the basic technology to analyze credit card transactions. After the San Diego company was acquired by Minneapolis, MN-based predictive analytics giant Fair Isaac and Co. in 2002 for about $810 million, several key HNC employees launched their own analytics startups.

San Diego software developer William J. Proffer created a customized Google map listing almost 80 predictive analytics companies in and around San Diego, and has generously given Xconomy permission to republish it here. (You can see the names and addresses of each company by clicking on the green pushpins; be sure to scroll the map north and south to see additional companies. Click on the “View Larger Map” link for the full version, including a complete list of all the companies, at Google Maps.) Proffer says the origins of San Diego’s analytics cluster are even deeper. [Continued below map]

View Larger Map

Proffer cites Integrated Software Systems Corp., founded in San Diego by Peter Preuss in 1970, as one of the “world’s leading independent developers of visual information systems software.” It was acquired by Computer Associates in 1986.

Proffer also points to British economist Clive Granger, who joined UCSD’s faculty in 1974, for using similar techniques to develop revolutionary economic forecasting methods. Granger and collaborator Robert Engle were awarded the 2003 Nobel Prize in Economics for their work in the area.

“In my mind,” Proffer says, “Those two things are basically the genesis of predictive analytics in San Diego.”

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