Approximately four years ago, Aspiration, a climate-conscious fintech startup, was poised for a $2 billion initial public offering. However, the company’s fortunes have taken a dramatic turn, with one of its board members pleading guilty to wire fraud and a co-founder being taken into custody for allegedly conspiring to deceive investors, as stated in a federal criminal complaint filed by the U.S. Attorney’s Office for the Central District of California.

Aspiration has been under federal investigation for several years due to questionable financial and carbon accounting practices. Nevertheless, the recent complaint sheds light on a series of loans obtained through allegedly deceitful means, further complicating the company’s situation.

Joseph Sanberg, Aspiration’s co-founder, was arrested on Monday for allegedly conspiring to defraud two separate funds of $145 million. On the same day, Ibrahim AlHusseini, a former independent board member, pleaded guilty to wire fraud for falsifying documents to aid Sanberg in securing the loans, according to federal prosecutors.

If convicted, Sanberg faces a maximum penalty of 20 years in prison. AlHusseini also faces the same maximum sentence, although he is cooperating with the prosecution, as stated by the U.S. Attorney’s Office for the Central District of California.

The startup has attracted a long list of prominent investors, including actors Orlando Bloom, Leonardo DiCaprio, and Robert Downey Jr., musician Drake, and basketball coach Doc Rivers. The company had planned to go public via a special-purpose acquisition company (SPAC) in 2021 but the deal fell through in 2023.

Sanberg and AlHusseini are accused of deceiving two separate investors. In 2020, Sanberg was negotiating the terms of a $55 million loan with an unnamed investor fund, using 10.3 million shares of his Aspiration stock as collateral. The investor fund required Sanberg to find a third party willing to purchase the stock in a secondary sale if the fund decided to opt out.

According to prosecutors, AlHusseini acted as the alleged third party. Sanberg reportedly convinced him to enter into a put option on the shares in January 2020, obligating AlHusseini to purchase the shares if the unnamed fund decided to sell.

However, AlHusseini lacked the $55 million necessary to pay the fund if it exercised the option, according to federal prosecutors. Sanberg and AlHusseini allegedly collaborated with a graphic designer in Lebanon to create fake brokerage account statements and bank documents, inflating AlHusseini’s assets by $80 million to $200 million.

With the put option in place, the fund loaned Sanberg $55 million. AlHusseini received $6 million from the loan as a premium payment for guaranteeing repayment in the event Aspiration went under.

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

Once again, AlHusseini allegedly agreed to a put option, this time for $65 million, in case the 10.3 million shares became worthless. Similar to the previous loan, Sanberg and AlHusseini allegedly presented the second fund with falsified documents that inflated AlHusseini’s assets. On this occasion, AlHusseini received $6.3 million as a premium payment.

In total, AlHusseini received $12.3 million from the scheme, as stated in his plea agreement.

A year later, Sanberg defaulted on the $145 million loan, and again in the spring of 2023. The fund that provided the loan exercised its put option with AlHusseini, who has yet to purchase the shares. The fund lost at least $145 million, according to the U.S. Attorney’s Office.