Clothing-as-a-Service Founder Accused of $300 Million Fraud

Federal authorities have accused the former head of clothing tech company CaaStle of defrauding investors.

Christine Hunsicker was charged Friday (July 18)  with wire fraud, securities fraud, money laundering, making false statements to a financial institution, and aggravated identity theft.

According to the U.S. Attorney’s Office for the Southern District of New York, the charges stem from an alleged scheme in which Hunsicker misrepresented the health of her now bankrupt business to dupe potential investors.

“While promoting CaaStle as a rapidly growing business valued at more than $1.4 billion, Hunsicker knew that CaaStle was in financial distress with limited cash and significant expenses,” the office said in a news release.

“To raise the capital for CaaStle’s operations, Hunsicker provided investors with falsified income statements, fake audited financial statements, fictitious bank records, and sham corporate documents that grossly overstated CaaStle’s operating profit, revenue, and available cash.”

In a statement shared with media outlets following Hunsicker’s arraignment Friday, defense attorneys Michael Levy and Anna Skotko said the government had “chosen to present to the public an incomplete and very distorted picture in today’s indictment,” despite their client’s efforts to be “fully cooperative and transparent” with prosecutors and the Securities and Exchange Commission (SEC).

The SEC had filed its own complaint against Hunsicker in tandem with the U.S. attorney, accusing her of generating false financial statements that overstated her company’s revenues by more than 7,300%.

Hunsicker had founded CaaStle — formerly known as Gwynnie Bee — in 2011, offering a “clothing-as-a-service” (CaaS) business that helped companies rent their clothing to consumers. Speaking with PYMNTS in 2018, Hunsicker said the company’s customer base tended to be women who were a bit more affluent and who faced the daily question of what to wear to work.

“This is someone who shows up in an office every day and is working with clients or in other public-facing capacities,” Hunsicker said. “How she presents herself to the world matters — and she knows that.”

By the spring of this year, Hunsicker had left the company, after the board of directors informed shareholders she had provided “certain investors with misstated financial statements and falsified audit opinions.” CaaStle declared bankruptcy weeks later.

The company is also facing a lawsuit in New York from P180 — a fashion-focused investment venture co-founded by Hunsicker and retail veteran Brendan Hoffman. He is now accusing her of misleading him, and CaaStle of engaging in “one of the largest frauds in history,” per a report by the publication The Fashion Law.