When Jenaro García’s tech company Let’s Gowex SA won the top prize from Spain’s marketing association in May, the presenter hailed him as an innovator who was making wireless Internet ubiquitous, “a magician who converted Wi-Fi into water.”

Mr. García, outfitted in an Indiana Jones-style jacket, appeared before the appreciative crowd alongside Wi-Fi Man, a masked, caped superhero figure.

The cheering for Mr. García stopped this month as Gowex’s success story abruptly unraveled. U.S. investment firm Gotham City Research LLC on July 1 posted a takedown of the company, asserting that its stellar financial results were largely fabricated and its highflying stock worthless.

With investors jumping ship, Mr. García gave one last defiant performance on Friday. At a meeting of employees, the 46-year-old chairman and chief executive vowed to bring “Wi-Fi to Gotham.” To demonstrate his resilience, he brandished metal pins that he said had been used to set 24 broken bones he had suffered in an accident years before.

The next day, though, he told Gowex’s board that the financial results had been fabricated for at least four years. Gowex filed for bankruptcy, and Mr. García sent a tweet asking forgiveness from those he had harmed.

Mr. García couldn’t be reached for comment, and Gowex declined to comment.

Mr. García, who had been held up as the archetype of a new brand of Spanish entrepreneur, now has become a reason to doubt the solidity of a business class that the government is counting on to lead a recovery from Spain’s worst recession in decades.

“I feel ashamed as a Spaniard and as a professor of corporate finance because I know that American investors will say ‘Oh, be careful before you invest in smaller companies in Spain,’ ” said Robert Tornabell, a professor at ESADE business school in Barcelona. “This scandal must lead to stronger regulations, and the companies must have real auditors.”

As other stocks plummeted on the Alternative Stock Market, the secondary exchange where Gowex had traded, some companies sought to be relisted elsewhere. “Gowex had discovered a toy market with few powers to function correctly,” said an editorial in the Spanish business daily El Economista.

Government officials and groups that had showered Gowex with awards attempted to dissociate themselves from its disgraced leader.

“When you give a prize, you listen to what the analysts say, what the market says, what investors say and everyone at that point thought they were good and worthy,” said a spokesman at Ernst & Young LLP, which had given Mr. García an award for innovation as part of its 2011 Spanish Entrepreneur of the Year program. “He has cheated the whole country and not just this country but France, the U.S., all of the world.”

Ernst & Young served as Gowex’s registered adviser from when the company listed its shares in 2010 until its collapse. The spokesman said Ernst & Young’s mandate wasn’t to audit information Gowex sent to the market, only to ensure that it was “presented in the right format and in a timely fashion.”

Wi-Fi firm Gowex was touted in Spain as an entrepreneurial success.

Gowex’s collapse is a blow to the conservative government of Prime Minister Mariano Rajoy, who in March awarded Mr. García a prize for the company’s export prowess. Mr. Rajoy has pledged to “lay out the red carpet for entrepreneurs,” whom his debt-burdened administration is counting on to propel the economy. The award was revoked following the recent Gowex news, as was the marketing-association prize that was given in May.

Before the revelations, Mr. García had portrayed himself as representative of a new generation of self-made business owners. “The despot who gets ultrarich and drives a Mercedes is disappearing,” he told the newspaper El Economista last year.

Mr. García was ranked the 39th-richest person in Spain last year by the newspaper El Mundo, with a fortune of €177.7 million ($241.8 million). That primarily was because of his ownership of Gowex stock. The shares closed above €26 ($35) earlier this year from just above €2 in late 2012. Trading in the shares was suspended last week, as the stock plunged.

Mr. García told an enthralling personal story. He said he had been struck by personal tragedy when an auto accident killed his parents and a brother.

He recalled starting in business by selling cassettes in Madrid’s sprawling Rastro flea market. From there, he said, he imported cars from Germany before moving into the tech world.

Gowex evolved from an earlier venture by Mr. García, an online bandwidth exchange. “Taking Gowex public was like having a baby” he told the magazine Actualidad Economica in 2012.

“Wi-Fi is a basic necessity, a fundamental right, just like the U.N. says the Internet is. If you don’t have access to it, you don’t have access to culture,” he told Madrid newspaper El País in 2012.

Investors were enthusiastic. But consumers in some Gowex markets complained about the service. When the company moved into Paris Metro stations in 2012, French tech website 01net gave Gowex poor reviews, citing limited range, slow service and an intrusive, time-consuming enrollment process.

Investors didn’t seem to care until Gotham issued its report last week. The investment firm noted that Gowex claimed double-digit profit margins offering free Wi-Fi while peers such as Boingo Wireless Inc. and iPass Inc. posted losses offering similar services. And despite its low-margin business, Gowex reported higher revenue per employee than Google Inc. and Facebook Inc., Gotham said.

Gotham also reported that Gowex said it received €2 million for providing Wi-Fi service in New York City but that city officials put the value of the contract at less than €200,000. The investment firm said that Gowex’s Spanish auditor, M&A Auditores SL, was obscure and charged a small portion of the fee that would be expected for a company with the €182.6 million revenue that Gowex claimed.

Mr. García initially denied the assertions and threatened legal action, before his confession Saturday.

“What’s clear is that the controls that should have been in place were lacking at board level and on the side of advisers and the market supervisor,” said Javier Martín Cavanna,a corporate-governance expert and head of the Spanish foundation Compromiso y Transparencia.

Transparency standards are higher on the main Spanish stock index, he said. But some problematic issues at Gowex, such as having one person as CEO and chairman, extend to several blue-chip companies in Spain, Mr. Martín Cavanna said.

Mr. García’s most recent statement was a letter to employees on Tuesday. He concluded with a copy of Rudyard Kipling’s poetic blueprint for manhood, “If,” which begins “If you can keep your head when all about you/Are losing theirs and blaming it on you.”