Just over four years ago, climate friendly fintech startup Aspiration was on the verge of a $2 billion public listing. Now, one of the startup’s board members has pleaded guilty to wire fraud and one of the co-founders has been arrested for allegedly conspiring to defraud investors, according to a federal criminal complaint filed by the U.S. Attorney’s Office of the Central District of California.
The fintech startup has been under federal scrutiny for years for questionable financial and carbon accounting practices. But the new complaint shines a light on a series of loans that were obtained using allegedly fraudulent tactics.
Aspiration co-founder Joseph Sanberg was arrested Monday for allegedly conspiring to defraud two different funds of $145 million. Also on the same day, Ibrahim AlHusseini, a former independent board member for the company, pleaded guilty to wire fraud for falsifying documents to help Sanberg secure the loans, according to federal prosecutors.
If convicted, Sanberg faces up to 20 years in prison. AlHusseini faces the same maximum penalty, though he is cooperating with prosecutors, according to the U.S. Attorney’s Office of the Central District of California.
The startup attracted a long list of famous investors of the years, including actors Orlando Bloom, Leonardo DiCaprio, and Robert Downey Jr., the musician Drake, and basketball coach Doc Rivers. The company was hoping to go public via SPAC in 2021, but the deal fell through in 2023.
Sanberg and AlHusseini are both accused of defrauding two different investors. In 2020, Sanberg was negotiating terms for a $55 million loan with an unnamed investor fund. He pledged 10.3 million shares of his Aspiration stock as collateral; the investor fund required Sanberg to find a third party to agree to buy the stock in a secondary sale if the fund wanted out.
AlHusseini was the alleged third party, according to prosecutors. Sanberg allegedly convinced him in January 2020 to enter into a put option on the shares, which would obligate AlHusseini to buy if the unnamed fund wanted to sell.
But AlHusseini didn’t have $55 million to pay the fund if it exercised the option, federal prosecutors say. Sanberg and AlHusseini allegedly worked with a graphic designer in Lebanon to mock up a fake brokerage account and bank statements to inflate AlHusseini’s assets by $80 million to $200 million.
With the put option in place, the fund loaned Sanberg $55 million. AlHusseini received $6 million from the loan as a premium payment for guaranteeing repayment in case Aspiration went under.
In November 2021, Sanberg allegedly refinanced the loan with a second unnamed investor fund. This time, the loan was for $145 million.
Again, AlHusseini allegedly agreed to a put option, this time for $65 million in case the 10.3 million shares became worthless. And like the previous loan, Sanberg and AlHusseini allegedly showed the second fund falsified documents that inflated AlHusseini’s assets. This time, AlHusseini received $6.3 million as a premium payment.
In total, AlHusseini received $12.3 million from the scheme, according to his plea agreement.
A year later, Sanberg defaulted on the $145 million loan. Then in the spring of 2023, he defaulted again. The fund that provided the loan exercised its put option with AlHusseini, who has not bought the shares. The fund lost at least $145 million, according to the U.S. Attorney’s Office.
