Christine Hunsicker was in her buddy’s Palo Alto, California, yard in 2011 questioning how each lady may have the sort of infinite clothes closet she’d grown up with. As a child in rural Pennsylvania, her household wasn’t notably rich, but she was all the time taking part in dress-up in outfits, like a penguin-print maxi costume or a shimmering sequin skirt, made by her seamstress aunt. A clothing-rental subscription firm could possibly be a blockbuster enterprise, she thought. She even had a reputation for it, impressed by a personality from a ebook she’d as soon as imagined however by no means wrote: Gwynnie Bee.
Hunsicker was obsessive about Rent the Runway—the startup that had sparked the clothing-rental class two years earlier. Gwynnie Bee would primarily be the identical concept, only for a unique crowd. Rather than renting out designer night put on and workplace necessities, she’d give attention to zany types corresponding to psychedelic flower-print moto jackets and paint-splatter attire for plus-size girls.
At the time, direct-to-consumer e-commerce startups, from make-up and pet meals to toothbrushes, have been elevating billions of {dollars} from enterprise capitalists. Hunsicker, who’d beforehand labored at a number of tech startups, knew the best way to use the period’s lingua franca to get traders to open their wallets. She additionally had gotten her palms on a replica of an early Rent the Runway pitch deck. She’d go on to innovate, curate and revolutionise her solution to thousands and thousands in funding injected by firms together with Sherpalo Ventures, an early-stage funding agency run by a founding member of Google’s board, and KCP Capital in Dubai. In a brainstorming session along with her staff, she preached one of her core beliefs when it got here to constructing a enterprise: “You can’t disrupt without disrupting.”
But seven years into Gwynnie Bee, she hadn’t disrupted a lot, so Hunsicker gave her authentic enterprise an bold twist. The actual cash on the time was in enterprise software program, often known as software-as-a-service. With its immense scalability and recurring income streams, SaaS startups corresponding to Slack and Dropbox have been being valued at greater than $5 billion. Instead of her firm solely renting out garments, it may grow to be retail’s equal of enterprise software program—promoting the expertise, the logistics and the bodily infrastructure to any model that wished to run a clothing-rental enterprise however didn’t need the effort. If she may make that leap, she wouldn’t be taking part in with thousands and thousands, however billions. She instructed staff this was the plan all alongside.
Hunsicker renamed the corporate CaaStle Inc.—meant to be a play on what she dubbed “clothing-as-a-service”—and relegated Gwynnie Bee and a second, budget-friendlier model, Haverdash, to grow to be the corporate’s private-label choices. CaaStle would remedy an issue for beleaguered mall retailers determined for income: usually when manufacturers had extra stock, they’d liquidate it at steep markdowns. With CaaStle, they’d be capable to monetise it not simply as soon as however many occasions over by renting out the clothes, together with unused stock from previous seasons.
CaaStle would construct rental web sites for its shoppers’ manufacturers, then function the unwieldy back-end logistics, together with distribution centres that dealt with an countless loop of clothes cleansing, storage, transport and returns. CaaStle’s overhead prices could be monumental, however Hunsicker knew the best way to increase capital. By the time she flew to Las Vegas in 2018 to ship a keynote speech at Shoptalk, one of the retail business’s largest annual occasions, she declared that her freshly pivoted firm would steal market share from Amazon.com Inc. “Disruption that isn’t,” one of her slides learn.
Within months, Hunsicker nabbed a half-dozen mall retailers and new traders. She additionally had large information to share along with her staff: The firm was on the verge of changing into a unicorn. “Our valuation now is $950 million,” she mentioned throughout one assembly, in line with former staff. Hunsicker scored tv appearances on CNBC, the place she was declared “the CEO changing retail with clothing rental”; took the stage at a Vanity Fair occasion; and persuaded John Hennessy, the chairman of Alphabet Inc. and former president of Stanford University, to grow to be an investor and board member.
Some CaaStle then-employees say they’d their doubts on the time. Why, they whispered, wasn’t their chief govt officer sharing fundamental financials with them? If the corporate was doing so properly, those that did have entry to the numbers puzzled, why hadn’t gross sales improved in additional than two years? Weren’t the warehouses nonetheless half-bare? “I didn’t see how we were going to make money,” says one of Hunsicker’s former executives who requested to not be named so they might freely focus on non-public enterprise issues. “They were constantly changing the business model.”
By March 2025, staff weren’t the one ones with severe doubts. Officials from the US Department of Justice and the US Securities and Exchange Commission allege that for six years, Hunsicker had lied to her traders about CaaStle’s efficiency and financials, regardless that she’d saved elevating thousands and thousands extra in funding till the very finish. An indictment handed down by the Justice Department outlines allegations of a brazen fraud scheme of greater than $300 million wherein she raised cash by forging revenue statements and falsifying audit reviews, lowering her losses and ballooning her revenues. Prosecutors laid out allegations that, if true, quantity to 1 of the most important monetary heists in current tech historical past, placing her up there with Theranos founder Elizabeth Holmes. In a separate lawsuit filed by the SEC, the company accuses Hunsicker of exaggerating her operation’s revenues greater than 70-fold.
Dressing Up the Results
When reached for remark, a consultant for Hunsicker, who has pleaded not responsible and is awaiting trial after being launched on a $1 million bond, referred to an announcement from her legal professionals Michael Levy and Anna Skotko issued in July: “Although Ms. Hunsicker has been fully cooperative and transparent with the Department of Justice, the US Attorney for the Southern District of New York nonetheless has chosen to present to the public an incomplete and very distorted picture in today’s indictment. There is much more to this story, and we look forward to telling it.”
“This was not a case of business missteps,” investor KSV Global wrote in a single of the civil lawsuits from Hunsicker’s traders accusing her of mendacity about her firm’s financials. “It was a meticulously orchestrated deception, engineered to attract funding and inflate valuation at the expense of truth.” (KSV received the swimsuit on a default judgement and was awarded upwards of $46 million. Hunsicker has since requested the court docket to vacate the default and reopen the case.) Interviews with greater than 30 former CaaStle staff, enterprise companions and traders, most of whom spoke underneath situation of anonymity so they might focus on non-public enterprise issues, and dozens of inside paperwork recommend that Hunsicker was a hypercompetitive manipulator who blew previous the startup ethos of fake-it-till-you-make-it. “There were times when I saw her walk right up to the line of what would be considered vision, and what would be considered false—just completely outside of reality,” says one of her former staff. “Where does the vision stop and the delusion begin?”
Around the time Hunsicker rebranded her firm as CaaStle, she confirmed as much as the corporate’s New York workplace with a brand new look. For so long as her staff had identified her, Hunsicker had mousy, shoulder-length soccer-mom hair and sometimes wearing an inoffensive suburban office-park uniform of blouses and trousers. She’d even worn flip-flops held collectively by duct tape, and people near her would beg her to look extra skilled for the sake of the corporate’s picture. “Christine was the antithesis—like as a person—the antithesis of fashion,” says Kaeya Majmundar, one of her former staff. “It would be shocking for her to start pitching a fashion business at all. Period.”
There was a collective gasp when Hunsicker strode into headquarters that morning. Her hair was buzzed quick on the perimeters, rising right into a pompadour. She began carrying unfastened denims, tees and leather-based jackets, just like the tech girlbosses in California. She started going to conferences carrying blazers in leopard and snakeskin prints, with the occasional shock of ruby-red lipstick for a photograph shoot. A pair of clear, thick-rimmed eyeglasses accomplished the look.
Hunsicker grew up in a small farming city the place her dad labored in a metal mill and her mother ready folks’s taxes. She attended faculties she’s described as some of the worst within the nation, so she devoted herself to sports activities, taking part in varsity soccer, basketball and subject hockey, the place she mentioned she developed a fierce competitiveness that even she’s admitted could also be excessive. “Someone who worked for me said, ‘You’re the most competitive person I’ve ever met, and I don’t mean that as a good thing,’” Hunsicker mentioned in a 2022 ebook she was interviewed for about girls and management.
A pair of years after graduating from Princeton University, she received an information analyst job at a tech providers firm in New York, the place she was ultimately laid off. Soon, she was launched to a fellow Princeton alum named Brian O’Kelley, a tech govt who was impressed by her advertising and marketing instincts, and he employed her at an enterprise software program firm referred to as Cetova. O’Kelley says the 2 launched into an affair that might finish his marriage and her relationship on the time. Hunsicker typically instructed O’Kelley that she was like Dagny Taggart, the sensible industrialist heroine in Ayn Rand’s libertarian bible Atlas Shrugged, who reveals a supreme perception in her talents and refuses to compromise her beliefs even when every little thing falls aside. “She would say it’s all of our job to be selfish, and if you’re not selfish, you’re weak and you’re going to get taken advantage of,” O’Kelley says.
A 12 months earlier than they received married in 2005, O’Kelley introduced Hunsicker over to Right Media, the place he was growing the web’s first promoting change. Hunsicker rose to grow to be president and chief working officer, working with Jaswinder Pal Singh, O’Kelley’s former professor at Princeton, who O’Kelley, the corporate’s chief expertise officer, had introduced on as an adviser. Yahoo! Inc., then one of the most important web firms on the earth, wished to amass it in 2007, however O’Kelley opposed the sale as a result of he thought it was too early to exit. The board fired O’Kelley and made Singh the interim CTO. Yahoo then acquired Right Media for $850 million. (Singh declined to remark.)
In the years after his ouster, O’Kelley mentioned he had been fired as a result of of a battle with the CEO in regards to the firm’s future. O’Kelley now says Hunsicker had a hand in forcing him out as their marriage was falling aside. (A consultant for Hunsicker mentioned in an announcement: “It’s obvious that Christine’s ex-husband has a weird ax to grind over his exit from Right Media and has told different stories about his departure. He will blame anything and anyone for it regardless of the truth.”)
After the divorce, the 2 hardly ever spoke, and O’Kelley went on to discovered AppNexus, a Right Media rival that he offered to AT&T Inc. for $1.6 billion in 2018. He describes his ex-wife as crafty, with little regard for moral boundaries. “I still can’t understand what the hell I was thinking or how that happened,” O’Kelley says of their marriage. “At some level, she takes pleasure from seeing her power and what she can get away with.”
At Yahoo, one other programmer entered Hunsicker’s orbit. George Goldenberg was a Stanford-trained engineer who had a command of advert marketplaces and stock methods and have become her alternative to assist her construct the tech infrastructure for her new undertaking: a plus-size clothing-rental service. Hunsicker had grow to be COO at drop.io, a web-based file-sharing firm, however after it offered, she left to show the aspect undertaking right into a full-fledged enterprise with Singh and Goldenberg. (Goldenberg didn’t reply to a request for remark.)
Hunsicker set off to lift cash for what by then was named Gwynnie Bee. Former worker Majmundar says Hunsicker appeared to undertake a mindset that founders typically do, pursuing development in any respect prices. “I don’t really care what it is, but I need it to be bigger. Not that I want it. I need it. And I’m willing to do absolutely anything it takes to get there,” she says.
Hunsicker started elevating cash at a frenetic tempo, attending a number of dinners each week to court docket traders. Rather than method large companies for main funding rounds, Hunsicker most well-liked to quietly add small traders one after the other. She went to angel traders and constructed a community of wealthy mates who may write large checks. Hunsicker would give them the pitch and the value, and inform them she was all the time open to tackle extra funds, in line with an individual with data of her fundraising techniques. In 2014 she was launched to hedge fund billionaire Bill Ackman and persuaded him to place in a small private funding.
Among her traders was Monica Graham, a former hedge fund supervisor who wrote Hunsicker checks for thousands and thousands of {dollars}. Graham requested her out, and the 2 dated for a time. At her residence in New York’s Hamptons, Graham would host events for her mates that Hunsicker and her early staff would use to seek out new contacts and lift extra funds for Gwynnie Bee by mingling with the rich crowd, in line with folks accustomed to the matter. Hunsicker even met the Clintons in January 2016, posting a photograph with them. “Bill and Hillary were jazzed for the photo op!” reads the caption. (Graham declined to remark.)
As the investor checks saved coming, Hunsicker employed a publicist. She was featured on the Today present’s web site and scored an look on CBS This Morning in 2016, the place she mentioned she’d delivered 3 million rental bins. A month later she did an interview with Forbes, which declared Hunsicker “no ordinary online fashion entrepreneur.”
At headquarters, in the meantime, it was changing into clear that the service wasn’t attracting sufficient subscribers. In a suggestions session with one division close to the tip of 2016, an early worker bluntly expressed issues: “Everyone feels like the company is doing very poorly,” the worker instructed Hunsicker, claiming she’d misled him in regards to the firm’s financials when he’d interviewed for the job. “People know, and people are scared.”
Then got here Hunsicker’s large break. She was chosen as one of the hosts of Project Runway: Fashion Startup, a Shark Tank-esque spinoff of the favored trend design present. Contestants would pitch their concept to a panel of trend and sweetness bigwigs together with designer Rebecca Minkoff and Birchbox co-founder Katia Beauchamp—and, within the function of no-nonsense tech dynamo, Hunsicker. She tried to outmaneuver the opposite judges, who have been additionally competing to put money into these firms, by bluffing to them backstage about her stage of curiosity. “We would speak off camera, and then I would come on and do something completely different to what I had just committed to,” Hunsicker mentioned on the time in a promo video for the present.
Investors, many of whom knew little about trend or retail, couldn’t get sufficient of Hunsicker, who had tech bona fides and knew simply the best way to deploy business jargon and dangle enviable monetary projections. In the spring of 2017, she gathered her 150 or so staff at Gwynnie Bee’s headquarters inside an previous Macy’s warehouse in New York to spill the large information about Hennessy—the “Godfather of Silicon Valley,” as enterprise capitalist Marc Andreessen as soon as referred to as him—changing into an investor and a board member. “It’s quite a coup,” she instructed her workers.
When the corporate rebranded itself as CaaStle the next 12 months, Hunsicker upgraded its digs. She employed dozens of new engineers, merchandisers and entrepreneurs, and moved her rising workers to a smooth workplace constructing in Midtown Manhattan outfitted with a rooftop terrace, a health middle and a golf simulator. She instructed her staff in regards to the significance of communication, motivation and keenness. They needed to be data-driven, collaborative and tenacious if the corporate was to succeed, she mentioned. “Together, we foster an environment that is direct, transparent and trusting,” one inside presentation on workplace tradition acknowledged, “in which honesty, respect, ownership and accountability are paramount in everything we do.”
Beginning in late 2017, Hunsicker instructed staff and mates that she had suffered a mind harm. While making an attempt to take a rest room mirror down, it popped off and hit her on the highest of the pinnacle. She instructed them she’d began to expertise short-term reminiscence loss, even asking an worker to comply with her across the workplace to take notes at her conferences, so she’d be capable to reference what she’d mentioned. Hunsicker instructed her board of administrators, too, and stayed on as CEO, in line with an individual with data of the discussions.
Meanwhile, Hunsicker was luring new shoppers, largely mall retailers determined for brand new income. Ann Taylor, Express and New York & Co. signed on, together with a pair of smaller, design-forward manufacturers together with Vince and Rebecca Taylor. With investor cash flowing in, CaaStle invested in distribution facilities in Ohio and Arizona, engineering expertise in India, and extra expertise and logistics workers in Mountain View, California. It began a branding division and expanded its merchandising division. Hunsicker even persuaded landlords of the Ohio distribution middle to scale back a deposit by promoting them on her startup’s imaginative and prescient. But as Hunsicker spent that new capital, her executives admitted in a 2018 inside presentation that they have been having hassle bringing in income. “Did not hit our 2017 Acquisition targets,” reads a word that the executives ready. “Were aware of this by Q2.”
Hunsicker created an enemy for her workers to rally in opposition to: Rent the Runway and Jennifer Hyman, its co-founder and CEO. The sizzling startup was valued at $1 billion and was within the early levels of planning an preliminary public providing. Magazines, together with the New Yorker, wrote gushing profiles about Hyman, a Harvard Business School graduate, because the face of subscription commerce. Representative Alexandria Ocasio-Cortez (D-NY) applauded Hyman when the corporate equalized advantages for hourly and salaried staff. The New York Times mentioned utilizing Rent the Runway was “transformational bliss.”
Those near Hunsicker describe her as fixated on Hyman, who on the time she had but to fulfill. Hunsicker usually criticized Rent the Runway’s expertise and logistics to traders, claiming its enterprise mannequin didn’t work, in line with an individual accustomed to the talks. “It was never friendly competition. We’re going to do better than them. We’re smarter than they are,” says one of Hunsicker’s former staff about their previous boss. “That’s who we want to knock out of the game.”
According to the lawsuit filed by the SEC, in 2019 Hunsicker’s finance division despatched her an revenue assertion with all of the numbers from the earlier fiscal 12 months: The firm was dropping greater than $47 million yearly with simply $23 million in income. Gwynnie Bee had been hemorrhaging cash for years, and now CaaStle—with its excessive labor and transport prices and consumer revenue-share agreements—wasn’t bringing in sufficient income both. So, the SEC alleges, Hunsicker whipped up a brand new revenue assertion, one which lower her losses to $24 million and nearly tripled income to $72 million, and despatched the faux doc to at the very least 10 different traders. They purchased it, and thousands and thousands in new capital started flowing in. Officials from the Justice Department and the SEC allege that this was the primary occasion of Hunsicker’s altering her books and specified by an indictment and lawsuit a sample of constant manipulation and fabrication of CaaStle’s funds over six years.
By early spring 2020, all of a sudden home-bound workplace staff didn’t want contemporary outfits and ladies didn’t have to lease attire to attend weddings over Zoom. Hunsicker furloughed some of her company workers. Former staff say she and others instructed account managers who have been coping with shoppers to spin a optimistic story out of the information, even because it was clear to them that each prized metric—conversions, retention, utilization, engagement—was in decline.
Hunsicker wanted to lift more cash and went to current and new traders for assist. Court filings later confirmed that she’d amassed a formidable record of financiers, together with a enterprise capital agency led by early Facebook investor Jim Breyer; hedge fund billionaire Seth Klarman’s nonprofit; and the funding supervisor for Henry Kravis, the billionaire co-founder of one of the world’s largest non-public fairness companies, KKR & Co. (None of these traders responded to a request for remark.)
In April 2020, in line with the SEC lawsuit, an investor requested for a standing replace, however CaaStle’s financials had deteriorated much more. So Hunsicker allegedly put collectively one other faux revenue assertion, in line with court docket paperwork. Ninety-million {dollars}, she wrote, with minimal losses. Authorities accused her of utilizing those self same numbers to steer an investor to wire her an extra $1.5 million. In the spring of 2021, Hunsicker went on the hunt once more, telling one of her current traders that she was seeking to increase as a lot as $20 million extra in funds. And once more, the SEC alleges, Hunsicker despatched a faux revenue assertion, wherein she wrote: “I would love for you to do some more.” The investor wired her an extra $2 million.
Meanwhile, Hunsicker’s fame as a badass lady in tech solely continued to develop. She racked up media accolades from Inc. journal’s “Female Founders” and Fast Company’s “World’s Most Innovative Companies.” Employees grumbled that the enterprise didn’t make any cash and resorted to asking the human sources division in regards to the firm’s true valuation, however they couldn’t get a straight reply. Neither did some traders, who complained that Hunsicker was gradual to comply with up even when she promised to. One says they seen that the financials Hunsicker shared in an Excel spreadsheet appeared like one thing thrown collectively in a highschool pc lab, not one created by a complicated multimillion-dollar firm.
Hunsicker’s private monetary strains additionally mounted as she put more cash into her enterprise. She’d gotten married once more—this time to Phaidra Knight, a former rugby participant for the US nationwide girls’s staff. The couple lived in a newly renovated 6,500-square-foot complicated with a koi pond and an indoor spa in Lafayette, a quiet township within the rolling hills of northern New Jersey. Hunsicker took out a $20 million mortgage from Emigrant Bank to place again into CaaStle and gave her shares as collateral, in line with state filings and an individual with data of the matter.
In March 2021, Hunsicker scored a high-profile deal that bolstered CaaStle’s fame. Ralph Lauren Corp. agreed to permit Hunsicker to function the Lauren Look, a rental service for girls’s put on. The designer’s son and firm’s chief branding and innovation officer, David Lauren, gushed about its potential. “Ralph Lauren is making a business model out of it,” Lauren instructed Women’s Wear Daily on the time. “We’re doing a lot more than just partnering with a company. We’ve built a whole style guide around it, we’ve done special marketing programs around it.” (A spokesperson for Ralph Lauren declined to touch upon the partnership.)
Even so, that fall, Hunsicker’s traders have been rising involved that she wasn’t sharing sufficient info with them and instructed her she wanted to ship them audited financials together with extra common updates, in line with court docket filings. Investigators say that when traders pressed for 2021 numbers, she instructed them that it was delayed as a result of CaaStle wasn’t excessive on the auditing agency’s precedence record. According to the SEC grievance, what traders didn’t know was that the auditor, BDO USA, had already supplied its report, exhibiting $18.6 million in income and $32.3 million in working losses.
The SEC claims that Hunsicker found out a workaround: She instructed her finance staff to ship her the audit report that had already been revealed, however to e-mail a draft of it in Word. She bumped up the numbers and eliminated the auditor’s warning that the corporate was in danger of folding, then added the phrase “DRAFT,” saved it as a PDF and despatched it to her traders. According to the SEC lawsuit, she added a word: The audit agency was nonetheless working by variations of the report, however the draft was “further along than expected.” Her doc boasted CaaStle’s finest numbers but: greater than $120 million in income. It went out to at the very least eight traders, and Hunsicker despatched a “final” model that went to greater than a dozen. This time, the SEC alleges, she appended an auditor’s signature to her doctored report, lending some reduction to her anxious traders.
Hunsicker, in the meantime, was dropping some of her most significant retail companions who weren’t seeing the {dollars} they have been promised. Ralph Lauren, her star signing, determined to fold its rental undertaking and didn’t renew its contract. Bloomingdale’s and Banana Republic did the identical. When Express, one of its longest-standing prospects, wished to exit its deal, CaaStle started writing checks of $250,000 monthly to the retailer. Hunsicker instructed workers that it was paying Express for “utilisation rights,” which meant she was paying the model to make use of its stock, say former staff. (Bloomingdale’s, Banana Republic and Express didn’t reply to requests for remark.)
The SEC grievance says that whereas income dried up, Hunsicker introduced to her traders a brand new milestone: CaaStle was all of a sudden worthwhile. Once once more, traders clamored for audited outcomes, and he or she complied. She instructed them income doubled from her final report back to $238 million, and the cash flowed in. One potential investor went to the funding committee the day after receiving the report and in the end wired greater than $7.5 million. Again, the numbers she’d supplied have been faux, the SEC alleges.
By now, Hunsicker was getting sloppy. According to authorities, one investor seen errors within the report and emailed the actual auditor. BDO allegedly instructed the investor that it hadn’t ready the report, then demanded a proof from Hunsicker. She wanted a doozy of an excuse for this one and allegedly searched the web for “created an audit firm fake,” in line with court docket paperwork. Hunsicker instructed the corporate she’d mistakenly despatched the investor a marked-up model of the report that she was going to make use of for a lecture she was giving at Princeton on “ethics and entrepreneurship,” the SEC alleges. The investor didn’t press any additional and cashed out their shares.
Hunsicker wanted a brand new means to herald income. This time she’d recruit influencers to CaaStle to assist them construct their very own private rental web sites utilizing garments from her firm’s current stock. All it might take is one big-name influencer to get issues rolling, then every little thing could be OK, she instructed folks near her. In 2024 she employed a staff of enterprise growth executives with six-figure salaries to construct a roster of influencers, however the brand new enterprise mannequin left workers baffled, and the service, which largely attracted small influencers, flopped. Cash was drying up, and former workers say that Hunsicker’s administration staff instructed staff to delay funds to distributors that have been sending invoices.
Even so, in September 2024, Hunsicker doubled CaaStle’s income yet another time and declared a money steadiness of roughly $113 million, authorities allege. The actual statements confirmed the corporate in a dire state, with about $16 million in income, its largest losses so far and fewer than $1 million in money remaining. In her haste, Hunsicker had ready a messy report that was lacking a web page and contained notes that have been out of date, in line with the SEC lawsuit. She then provided two traders an opportunity to see the doc in her workplace in October 2024.
One of these traders, Jed Lenzner—who manages KKR co-founder Kravis’ investments—seen these errors. According to an individual accustomed to the scenario, Lenzner referred to as the auditor BDO, which instructed him that it hadn’t ready the report he’d seen in her workplace—actually, CaaStle was now not a consumer. After Lenzner confronted Hunsicker, she provided him a alternative: He may do nothing, as a result of there was worth within the firm, or he may redeem his funding within the firm. Lenzner selected neither and as an alternative reported Hunsicker to her board of administrators.
Lenzner’s whistleblowing didn’t result in a full-blown ouster. Instead, in December, CaaStle’s board eliminated Hunsicker as a member however saved her on as CEO. The board started an inside investigation, hiring regulation agency Cravath, Swaine & Moore to look into any misconduct, and prohibited Hunsicker from fundraising or signing new contracts. Hennessy, her star board member from Alphabet, stepped down, distancing himself from the upcoming scandal. (Hennessy didn’t reply to requests for remark.) The firm bought a $2 million insurance coverage coverage, efficient Dec. 18, to guard administrators and officers from fiduciary private losses in the event that they have been sued, in line with a replica of the coverage. The SEC claims that the board didn’t inform traders that any of this was occurring.
At a board assembly in January, Singh, as the brand new chairman, acknowledged the apparent: The enterprise was unlikely to grow to be worthwhile. According to minutes from the assembly, Singh inspired his friends to give attention to one other new alternative that Hunsicker had conjured up. They’d staff up with a brand new firm she’d co-founded referred to as P180, which might put money into manufacturers and work in tandem with CaaStle. Hunsicker was the one means they might shut that deal, he mentioned, which wanted to occur for CaaStle to have an opportunity at survival. Even so, Singh and Goldenberg had already been cashing out their shares within the months prior—Singh pulled out $6 million, and Goldenberg, near $3 million, in line with chapter filings.
Later that month, Hunsicker gathered her workers at headquarters to announce a spherical of layoffs and inform the remaining staff that CaaStle would refocus on partnerships by the P180 enterprise. Hunsicker’s P180 co-founder, veteran retail govt Brendan Hoffman, began understanding of the CaaStle workplace, however staff remained confused in regards to the association and the way it might work. “Big opportunities have just come our way in that space,” Hunsicker instructed them. “It resonates a ton with brands and retailers, and it’s going to help us build the new economy faster and better.” (Hoffman didn’t reply to a request for remark.)
During this time, Hunsicker saved making an attempt to lift funds for CaaStle, regardless that she was banned by the board from doing so, prosecutors allege, and he or she began promoting off $13 million of her shares and convertible notes in her firms. According to the indictment, Hunsicker tried after that to jettison an extra $19 million in her personal shares, and following a gathering with an investor to debate the potential deal, she was frightened sufficient to sort these phrases into an web search: “bank fraud vs. wire fraud severity.”
Early one morning in March, officers from the Justice Department confirmed up at her New Jersey mansion to grab digital units. The US Attorney for the Southern District of New York’s workplace, led by its securities unit, had been investigating CaaStle for potential fraud, in line with an individual accustomed to the probe. It’s the identical department concerned in monetary fraud instances together with the FTX crypto scheme and the racketeering conspiracy operated by executives from Archegos Capital Management.
Several senior executives at CaaStle obtained subpoenas, and Goldenberg and his friends on the board ready a letter telling shareholders they’d eliminated Hunsicker from her place as CEO, with Goldenberg taking up. The board assessment discovered Hunsicker had violated firm insurance policies, and the board instructed traders that in the event that they’d ever obtained monetary info from her, these numbers couldn’t be trusted. CaaStle was now “facing a severe and immediate liquidity problem,” the board mentioned, whereas including that nobody else on the administration staff was concerned within the alleged misconduct. “The performance to date has not matched what Christine claimed,” the board mentioned within the letter. “We have learned that Christine provided certain investors with misstated financial statements and falsified audit opinions, as well as capitalization information that understated the number of company shares outstanding.”
Goldenberg and Singh, the appearing board chair, convened CaaStle’s staff and instructed them they have been being placed on unpaid furlough for 2 weeks, efficient instantly. Singh spoke to workers on a name he took from his automobile, absolving everybody however Hunsicker. “It’s important for you to know that no one on the management team has been found to be aware of, or complicit in, the violation of company policies.” Goldenberg instructed them that they have been experiencing a extreme money scarcity as a result of the corporate loaned cash to its new companion, P180. “Christine, as you know, was CaaStle’s primary fundraiser,” Goldenberg mentioned. “She’s no longer able to perform this function.”
Then got here the lawsuits. EXP Topco, which owns the Express model, sued in New York, alleging that CaaStle had infringed on emblems and breached varied agreements. Investor KSV filed that lawsuit in opposition to Hunsicker in Florida claiming that it was “misled through false financials and doctored reports” that CaaStle’s enterprise was booming. P180 sued CaaStle and its executives, together with Hunsicker, for fraud, arguing that it might by no means have labored along with her if administration knew the reality about CaaStle’s funds, calling Hunsicker “a world-class fraudster ranking alongside the likes of Bernie Madoff and Elizabeth Holmes.” (Hunsicker has denied the allegations in a submitting.)
On a Friday afternoon in July, Hunsicker confirmed up at a federal courthouse in downtown Manhattan to look earlier than a decide. She walked as much as a courtroom on the fifth ground carrying a white floral button-down tucked into black pants, reminiscent of the humdrum type she’d traded in years in the past. She nervously rocked backwards and forwards on the balls of her ft as she waited to enter. She was charged with one depend of wire fraud, two counts of securities fraud and one depend of cash laundering—every carrying a most sentence of 20 years in jail—along with one depend of making false statements to a monetary establishment and one depend of aggravated id theft. Hunsicker pleaded not responsible to all fees.
By then, the Gwynnie Bee retailer had been taken down, CaaStle was liquidating its property in chapter proceedings, all staff had been laid off, and traders have been making an attempt to determine the best way to recoup some of the $534 million in funding they’d sunk into Hunsicker’s firm. CaaStle has listed its property at $10 million to $50 million, however a court-appointed trustee is now sifting by its company stays to determine what’s recoverable.
There’s remarkably little. The firm had some patents of unknown worth for issues corresponding to clothes inspection processing strategies, together with some subscriber lists and domains. There was solely about $886,000 price of its personal stock left in warehouses. It didn’t have any actual property, simply leases. A liquidator has been auctioning off laundry tools: washing machines, garment racks and rolling vinyl baskets.
Meanwhile, Hunsicker’s nemesis Rent the Runway is enduring its personal restoration from the pandemic. Hyman, nonetheless operating the corporate, says she isn’t shocked by CaaStle’s downfall. “Over the past 14 years, she copied our public statements, lied to investors about our business model, and lied about us to the designer community,” Hyman mentioned in an e-mail. “Now, with her paper thin veil of legitimacy torn away, the world can now see that the emperor has no clothes—not even rented ones.”
By Jill R Shah and Kim Bhasin