OC Entrepreneur Admits to Conspiring to Defraud Investors
Introduction to the Case
The co-founder of the now-bankrupt “environmentally conscious” digital bank Aspiration that allegedly gave Los Angeles Clippers star Kawhi Leonard a $28 million endorsement as a way to circumvent the league’s salary cap pleaded guilty Monday to conspiring to fleece investors out of $248 million.
Joe Sanberg, 46, of Orange, entered his plea in Los Angeles federal court to two counts of wire fraud, felonies that together carry a sentence of up to 40 years behind bars.
The Scheme and Its Consequences
Sentencing was scheduled for Feb. 23. The Marina del Rey firm sold itself as a socially conscious online banking company, offering investments and focusing on the climate crisis. It also generated and sold carbon credits meant to help offset greenhouse gas emissions. According to court filings, Aspiration’s eco-friendly pitch attracted celebrity investors including Robert Downey Jr., Orlando Bloom, Leonardo DiCaprio and Steve Ballmer, the former Microsoft chief executive, philanthropist and owner of the Clippers, before the banking company filed for bankruptcy in March.
Details of the Fraud
According to court documents, Sanberg devised a scheme in 2020 to use his role as a co-founder and board member of Aspiration as well as his shares of company stock to defraud lenders and investors. Sanberg and fellow Aspiration board member Ibrahim AlHusseini promised shares of Sanberg’s stock to two lenders to obtain $145 million in loans, according to the U.S. Department of Justice. The board members falsified bank and brokerage statements to inflate AlHusseini’s assets by tens of millions of dollars to secure the loans, the U.S. Justice Department said.
Related Investigations and Denials
AlHusseini, 51, of Venice, pleaded guilty in March to wire fraud for falsifying documents that aided in the scheme and is also expected to be sentenced in February. Ballmer and the team are under investigation by the NBA following a report that Leonard allegedly accepted a $28 million endorsement from Aspiration as a way to circumvent the league’s salary cap, according to media reports. Ballmer, who had previously invested $50 million in Aspiration, has denied he had knowledge of the deal or that he directed the company to strike one. The Clippers have also denied any wrongdoing in connection with the alleged Aspiration endorsement deal with the two-time NBA champion and two-time Finals MVP.
Fraudulent Activities and Their Impact
An early investor in meal delivery service Blue Apron, Aspiration booked revenue from customers between March 2021 and November 2022, but Sanberg allegedly did not disclose that he was the source of the payments. As a result, Aspiration’s financial statements were inaccurate and reflected much higher revenue than the company in fact received, according to prosecutors. Sanberg continued to solicit investors to invest in Aspiration securities into this year, court papers show. According to the DOJ, Sanberg defrauded lenders and investors with fraudulent materials describing Aspiration’s financial condition, including a fabricated letter from Aspiration’s audit committee that falsely stated Aspiration had $250 million in available cash and equivalents at a time the company had less than $1 million in available cash.
Conclusion
The case of Joe Sanberg and Aspiration highlights the importance of diligence and transparency in the financial sector. Sanberg’s admission of guilt to conspiring to defraud investors out of $248 million serves as a reminder of the severe consequences of fraudulent activities. It also underscores the need for investors to be cautious and aware of potential scams, especially those disguised under socially conscious or eco-friendly banners.
FAQs
- What was Aspiration?
Aspiration was a digital bank that presented itself as an environmentally conscious online banking company, offering investments and focusing on the climate crisis. - What was the nature of Joe Sanberg’s plea?
Joe Sanberg pleaded guilty to two counts of wire fraud, which together carry a sentence of up to 40 years behind bars. - How much did the victims lose due to the fraud scheme?
The victims sustained more than $248 million in losses as a result of the fraud scheme. - Is Steve Ballmer under investigation?
Yes, Ballmer and the team are under investigation by the NBA for an alleged endorsement deal with Kawhi Leonard that might have circumvented the league’s salary cap. - What is the current status of Ibrahim AlHusseini?
Ibrahim AlHusseini pleaded guilty in March to wire fraud and is expected to be sentenced in February.
