Caastle Board Confirms Financial Distress & Furloughs

CaaStle Facing Financial Crisis and Allegations of Misconduct

CaaStle, initially established in 2011 as a subscription service specializing in plus-sized apparel, and subsequently evolving into an inventory monetization platform for clothing retailers, is currently experiencing significant financial hardship. This confirmation was provided to TechCrunch following initial reporting by Axios.

Leadership Changes and Investigation

According to a letter from the board, as reported by Axios, the company is nearing depletion of its financial resources. CEO Christine Hunsicker has resigned from both her position as chief executive and her role on the board of directors.

Furthermore, the company has engaged law enforcement authorities to investigate potential financial misconduct. A complete furlough of all employees has also been implemented, as confirmed by CaaStle.

Company Statement

“The Board is deeply disappointed by the conduct that has led to this moment. Our immediate focus is on addressing the company’s challenges, supporting our employees, and preserving the value of our technology and business operations.”

The company continued, “We regret having to temporarily furlough our employees, but we believe this will best position the company to successfully recover from our current situation,” as stated in an emailed response to TechCrunch’s inquiry.

Funding and Allegations

CaaStle has secured over $530 million in funding throughout its history. PitchBook estimates the most recent funding round, completed in 2019, totaled $43 million.

The board, in the aforementioned letter also cited by Puck, alleges that Hunsicker provided misleading information to investors regarding the company’s financial performance.

Specifically, the allegations include misrepresentations about the company’s capital, outstanding shares, and the submission of two purportedly “falsified” audit opinions.

Fundraising Efforts and Potential Fraud

Reports from both Axios and Puck indicate that Hunsicker was actively engaged in fundraising shortly before her departure, making assertions about the company’s robust financial health.

Axios suggests that if the board’s allegations substantiate a case of fraud against the founder, it could represent one of the largest such cases on record.

Comparison to Frank Case

Last week, Charlie Javice, founder of student loan application startup Frank, was convicted of defrauding JPMorgan Chase, which acquired Frank for $175 million. The bank alleged inflated customer numbers.

However, the total investment in CaaStle is estimated to be three times greater than the amount involved in the Frank case.

Outlook for Startups

Experts have indicated to TechCrunch that 2025 is projected to be another challenging year for startup failures, despite this situation not being a typical startup shutdown scenario.