Aspiration Co-founder Accused of $145M Investor Fraud

Aspiration Fintech Faces Fraud Allegations

Approximately four years ago, Aspiration, a fintech company focused on climate-friendly financial solutions, was nearing a public listing valued at $2 billion. Currently, the company is embroiled in legal issues, with a board member having admitted to wire fraud and a co-founder arrested on charges of investor fraud, as detailed in a federal criminal complaint filed by the U.S. Attorney’s Office for the Central District of California.

Federal Scrutiny and Questionable Practices

For several years, Aspiration has been subject to federal investigation regarding its financial reporting and carbon accounting methods. The recent complaint highlights a series of loans acquired through what authorities allege were deceptive practices.

Arrests and Guilty Plea

Joseph Sanberg, a co-founder of Aspiration, was arrested on Monday, accused of conspiring to defraud two investment funds out of $145 million. Simultaneously, Ibrahim AlHusseini, a former independent board member, pleaded guilty to wire fraud for allegedly falsifying documentation to facilitate Sanberg’s loan acquisitions, according to federal prosecutors.

Potential Penalties

Should he be convicted, Sanberg could face a prison sentence of up to 20 years. AlHusseini is subject to the same maximum penalty; however, he is actively cooperating with the prosecution, as stated by the U.S. Attorney’s Office of the Central District of California.

High-Profile Investors

Over time, Aspiration attracted investment from numerous well-known figures. These include actors Orlando Bloom, Leonardo DiCaprio, and Robert Downey Jr., musician Drake, and basketball coach Doc Rivers.

Failed SPAC Deal

The company initially aimed to become publicly traded through a Special Purpose Acquisition Company (SPAC) in 2021, but this plan ultimately failed to materialize in 2023.

The Alleged Scheme – First Loan

Both Sanberg and AlHusseini are accused of defrauding two separate investors. In 2020, Sanberg was negotiating a $55 million loan with an unnamed fund. He offered 10.3 million shares of his Aspiration stock as collateral.

The investor fund stipulated that Sanberg secure a third party to purchase the stock in a secondary sale should they wish to exit the agreement.

Falsified Documents

Prosecutors allege that AlHusseini acted as this third party. Sanberg purportedly persuaded him in January 2020 to enter into a put option, obligating AlHusseini to buy the shares if the fund decided to sell.

However, AlHusseini lacked the $55 million necessary to fulfill the option if exercised. Allegedly, Sanberg and AlHusseini collaborated with a graphic designer in Lebanon to create fabricated brokerage account statements and bank records.

These falsified documents were intended to inflate AlHusseini’s net worth by between $80 million and $200 million.

Loan Approval and Premium Payment

With the put option in place, the fund approved the $55 million loan to Sanberg. AlHusseini received a $6 million premium payment for guaranteeing repayment in the event of Aspiration’s financial difficulties.

Second Loan and Further Deception

In November 2021, Sanberg allegedly secured a refinancing of the loan with a second, unnamed investor fund, this time for $145 million.

AlHusseini again purportedly agreed to a put option, this time covering $65 million in case the 10.3 million shares lost value. Similar to the first loan, Sanberg and AlHusseini allegedly presented the second fund with falsified documents exaggerating AlHusseini’s assets.

This resulted in a $6.3 million premium payment to AlHusseini.

Total Funds Received by AlHusseini

According to his plea agreement, AlHusseini received a total of $12.3 million from the fraudulent scheme.

Loan Defaults and Losses

A year later, Sanberg defaulted on the $145 million loan, and again in the spring of 2023. The lending fund then attempted to exercise its put option with AlHusseini, who failed to purchase the shares.

The U.S. Attorney’s Office reports that the fund incurred a loss of at least $145 million.