Dive Brief:
- The CEO of a San Francisco-based e-commerce startup misled investors about contracts with well-known consumer brands, the Securities and Exchange Commission (SEC) has alleged.
- Andrew Chapin, founder and CEO of Benja, told investors that the company was a successful online advertising platform generating millions of dollars in revenue from popular consumer clothing brands and retailers. But the company never did business with the brands he named.
- To secure investments, Chapin enlisted associates to help induce investments from venture capital investors by impersonating representatives of Benja's purported customers.
Dive Insight:
Among deceptions, the SEC alleged, Chapin's associates impersonated the supposed founder of a venture capital fund who claimed to have made a large investment in Benja, and Chapin provided an investor with forged contracts and doctored bank statements.
"We allege that Chapin violated federal securities laws by deceiving investors about the most fundamental aspects of Benja's business by falsely portraying it as a successful e-commerce technology company that in a short period of time had generated significant revenue from several high-profile clients," Erin Schneider, director of the SEC's San Francisco Regional Office, said. "We will continue to pursue companies and executives who mislead investors."
The SEC's complaint, filed in the U.S. District Court for the Northern District of California, charges Benja and Chapin with violating the antifraud provisions of the federal securities laws and seeks permanent injunctions, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Chapin.
In a parallel action, the U.S. Attorney's Office for the Northern District of California today announced criminal charges against Chapin.
The SEC investigation is ongoing.
