Caastle, a war fashion startup whose board accused founder Christine Hunsicker of economic fraud, is beginning to face lawsuits from partners and suppliers who missed payments and increased fraud allegations.
As first reported by the suit found in Axios and TechCrunch, Caastle is being sued by P180, which was launched to invest in companies using Caastle technology, and by Expco, an apparel company that Caastle never paid it after reaching a settlement due to copyright infringement.
Caastle representatives did not immediately respond to TechCrunch’s request for comment.
The P180 suit claims that “it was not true about Caastle.” The lawsuit alleges that Caastle tried to hide details of revenue and financial stability from the P180. “The P180 then makes multiple loans in the hopes of fraudulently guiding P180, among other things, and getting the viable assets that P180 ultimately made,” the lawsuit alleges, adding that Castle also tried to force the two.
The lawsuit continues, saying that the “investment has full control over the board” because P180 believed it was misunderstood. “The P180 has been harmed by more than $58 million and is seeking a recovery of these revenues, withdrawal of contracts, and rewind the corporate ties between itself and Castle.”
Meanwhile, Expco is also suing. Caastle alleges that after reaching a settlement on suspicion of copyright infringement, he violated the settlement agreement by failing to pay a fine.
Axios also does not report the names of investors, but also reports rumors of possible class action lawsuits against the investment company that brought Caastle retail investors. Axios first reported news of Caastle’s financial problems a month ago. The company’s founder, Hunsicker, resigned from the board of directors and resigned from his role as CEO.
The company is exploring bankruptcy and has secured $2.7 million in funding to help with the process, Axios further reported. Caastle has raised more than $530 million in total, with its final round of $43 million in 2019, with Pitchbook estimates.
In April, the board confirmed to TechCrunch that its financial situation was so disastrous at that point that it had to attack its employees. If $530 million is gone, this will be one of the biggest startup fraud cases in recent history. In comparison, Frank, a student loan application startup, was purchased by JPMorgan for $175 million. Frank’s founder, Charlie Javis, was found guilty of fraud last month.
TechCrunch spoke to two former employees. The former employee had not witnessed any allegations of fraud, but said he was not surprised to hear that the company had financial problems.
One former employee who asked to remain anonymous does not recall the company that has updates on its financial health and how well it is going. “Everyone laughed at it and said, ‘Yeah, you probably aren’t making any money,” the employee told TechCrunch.
When asked to respond to the allegations of fraud, the person said, “I don’t think anyone expects that.”
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