Scoop: Fashion startup accuses founder of misconduct, after raising $534 million
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Christine Hunsicker in 2019. Photo: Mark Kauzlarich/Bloomberg via Getty Images
Fashion technology company CaaStle is almost broke and is accusing its founder and former CEO Christine Hunsicker of financial misconduct, Axios has learned from multiple sources.
Why it matters: CaaStle had raised over $530 million in venture capital, and its investors appear to be wiped out, in what would be one of the biggest startup frauds ever.
- All of CaaStle's employees have been furloughed for two weeks, effective today.
Catch up quick: Hunsicker launched the company Gwynnie Bee in 2011, as a subscription box service for plus-sized women's fashion.
- She would spend the next 14 years in constant fundraising mode, including from high-net-worth individuals like Bill Ackman, and built a board that at points included venture capitalist Ram Shriram and Alphabet chairman John Hennessy.
- The CaaStle rebrand in 2019 reflected an expansion to provide white-label subscription services to other clothing brands and retailers, including Ralph Lauren.
Behind the scenes: According to a letter sent on March 29 to investors from the company's board of directors, obtained by Axios, Hunsicker had been providing some investors with "misstated financial statements and falsified audit opinions, as well as capitalization information that understated the number of company shares outstanding."
- She had been fundraising as of a week ago, despite the board actively investigating her actions. She has now resigned as both CEO and a director, and the company says law enforcement is investigating, per the letter.
- It is unclear who remains on the board, except for longtime COO and interim CEO George Goldenberg, and why neither they nor top executives recognized the trouble earlier.
- A company spokesperson confirmed the furloughs and the authenticity of the shareholder letter.
Zoom in: Hunsicker also recently co-founded another company called P180, an inventory monetization company that has acquired a majority stake in retailer Vince and a minority stake in clothing brand Altuzarra.
- That company seems to use CaaStle technology, although is a separate legal entity with a different CEO.
- Axios reached out to Hunsicker via LinkedIn, but has not yet heard back.
- P180 was raising between $150 million to $200 million as of last month, according to an investor pitchdeck obtained by Axios.
