CaaStle, the embattled fashion startup whose board of directors accused its founder, Christine Hunsicker, of financial misconduct, is starting to face lawsuits from a partner and a supplier over missed payments and more allegations of fraud.As first reported by Axios and by suits seen by A Technology NewsRoom, CaaStle is being sued by P180, a vehicle it launched to invest in companies that used CaaStle technology, and by EXP Topco, an apparel company that says CaaStle never paid it after reaching a settlement for copyright infringement.A representative for CaaStle did not immediately respond to A Technology NewsRooms request for comment.The P180 suit alleges, Nothing about CaaStle was true.
The lawsuit claims that CaaStle tried to hide details of its income and financial stability from P180.
It then fraudulently induced P180, among other things, to raise capital and take out multiple loans in the expectation that P180 would acquire viable assets, which P180 ultimately did, the suit alleges, adding that CaaStle also tried to force the two to merge.The suit goes on to say that because P180 believed it was misled, its investors took full control of the board, the suit continues.
P180 has been harmed in excess of $58 million and seeks recovery of those proceeds, rescission of contract, and unwinding of corporate ties between itself and CaaStle.Meanwhile, EXP Topco is also suing.
It alleges that CaaStle breached a settlement agreement by not paying fines after reaching the settlement over alleged copyright infringement.And Axios is also reporting on rumors of a possible class-action lawsuit against an investment firm that brought CaaStle retail investors, although it didnt report the name of the investor.
Axios first reported the news of CaaStles financial troubles a month ago.
Hunsicker, the companys founder, resigned from the board and stepped down from her role as CEO when the company said it was investigating allegations of financial misconduct.The company is exploring bankruptcy and secured $2.7 million in financing to help that process, Axios further reported.
CaaStle raised over $530 million total, with its last round raised in 2019 at $43 million, PitchBook estimates.In April, the board confirmed to A Technology NewsRoom that its financial circumstances were so dire at that time that it had to furlough employees.
Should that whole $530 million be gone, this would be one of the largest startup fraud cases in recent history.
In comparison, Frank, the student loan application startup, was purchased by JPMorgan for $175 million.
Franks founder, Charlie Javice, was found guilty of fraud last month.A Technology NewsRoom spoke to two former employees who said they were not surprised to hear that the company had financial troubles, though they didnt witness any of the alleged fraud.One former employee, who asked to remain anonymous, doesnt recall the company holding updates about its financial health or how well it was doing.
I think everyone laughed it off and was like, Oh, we probably dont make any money, the employee told A Technology NewsRoom.When asked for a reaction to the fraud allegations, this person said, I dont think anyone expected it.