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Aspiration Co-founder Arrested for Defrauding Investors of $145M

Aspiration Co-founder Arrested

Over four years ago, climate-friendly fintech startup Aspiration was on the brink of a $2 billion public listing. Now, the company finds itself at the center of a federal fraud case. One of its board members has pleaded guilty to wire fraud. At the same time, a co-founder has been arrested for allegedly defrauding investors, according to a criminal complaint filed by the U.S. Attorney’s Office for the Central District of California.

For years, Aspiration has been under federal scrutiny for questionable financial and carbon accounting practices. However, the new complaint exposes a series of fraudulent loans obtained through deceitful tactics.

On Monday, federal authorities arrested Aspiration co-founder Joseph Sanberg, accusing him of conspiring to defraud two investment funds out of $145 million. That same day, Ibrahim AlHusseini, a former independent board member, pleaded guilty to wire fraud for falsifying documents that helped Sanberg secure the loans, prosecutors said. Both men face up to 20 years in prison, though AlHusseini is cooperating with investigators.

Over the years, Aspiration has attracted various famous investors, including Orlando Bloom, Leonardo DiCaprio, Drake, and Robert Downey Jr. In 2021, the startup planned to go public via SPAC, but the deal collapsed in 2023.

Sanberg and AlHusseini are accused of defrauding two different investors. In 2020, Sanberg sought a $55 million loan from an unnamed investment fund, offering 10.3 million shares of Aspiration as collateral. The fund required a third-party buyer to agree to purchase the shares if it wanted to exit. Sanberg enlisted AlHusseini as that buyer.

However, according to prosecutors, AlHusseini lacked the financial means to cover the deal. So, both worked with a Lebabon-based graphic designer to forge documents inflating AlHusseini’s assets by $80 million to $200 million. With these falsified documents, the fund approved the $55 million loan. AlHusseini received a $6 million premium for backing the agreement.

Later in 2021, Sandberg again refinanced the loan with a second investor fund, securing $145m. And once again AlHusseini agreed to put an option for $65m, by using fraudulent financial statements. In return, AlHusseini got another $6.3m.

Eventually, in 2022 Sanberg defaulted on the $145m loan, and by spring 2023, he defaulted once again. Then, the investor fund exercised its put option with AlHusseini, but as usual, he failed to buy the shares, leaving the fund with a $145m loss.

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