The next shoe has fallen for Christine Hunsicker — who built CaaStle up to be the future of fashion rental only to have it all disappear into scandal, a Chapter 7 liquidation, a host of lawsuits and, now, a $300 million federal indictment for fraud. 

The U.S. Attorney’s office in Manhattan unsealed an indictment against Hunsicker on Friday, laying out charges of wire fraud, securities fraud, money laundering, making false statements to a financial institution and aggravated identity theft.

Hunsicker, 48, surrendered herself to authorities on Friday morning and was due to appear before a U.S. magistrate judge later in the day. The wire fraud, securities fraud and money laundering charges each carry a maximum sentence of 20 years in prison while the making false statements to a financial institution charge could cost her as much as 30 years in prison. A lawyer representing her on a separate federal case did not immediately return a WWD request for comment.

Not very long ago Hunsicker was an on-the-rise entrepreneur in fashion, very practiced at selling herself and the future of rental and seen as a very smart fundraiser. 

More than a little too smart, according to the indictment, a separate suit by the Securities and Exchange Commission on Friday and pending cases against her and CaaStle in federal and New York state court. 

While a certain amount of hyperbole is generally tolerated when chief executive officers of private companies tout their businesses and cite revenue figures that are, well, optimistic, things necessarily get real and the financials are laid bare when investors buy in. 

But according to the growing stack of legal paperwork, Hunsicker was not just tiptoeing across the line, but sprinting past it, doctoring audit reports, falsifying other documents, faking a screen shot of CaaStle’s bank accounts and overstating revenues by more than 7,300 percent.

“Christine Hunsicker allegedly submitted fraudulent financial statements to swindle investors and banks of more than $300 million,” FBI assistant director in charge Christopher Raia said in a statement Friday. “This alleged scheme was stitched together with repeated deception and misinformation, ultimately betraying the trust of the defendant’s clients.”

The indictment shines a harsh light on Hunsicker, but might take some of the heat off of CaaStle’s board, which was responsible for overseeing her. 

“From the indictment, I think the board gets a little relief,” said Douglas Hand, an attorney who specializes in fashion. “Hunsicker was really rogue here, beyond what a board or audit committee could easily catch. You don’t often see this kind of egregious behavior in fashion deals but often do from tech deals — it underscores for me that the company was a tech platform first and foremost.” 

While there are any number of people in tech and fashion looking to raise money for their companies, Hunsicker was much more successful than most, selling her dreams to well-known and sophisticated players, reportedly investor Bill Ackman among them.

“Hunsicker solicited investments from prominent venture capitalists — including investors located in Manhattan, New York — and, at times, valued the CaaStle business at more than $1.4 billion,” the attorney general’s statement said. “In fact, and as Hunsicker well knew, CaaStle was in financial distress with limited available cash and significant expenses.”

In one case, Hunsicker sent an investor an income statement showing CaaStle had an operating profit of nearly $24 million in the second quarter of 2023, when operating profits actually tallied less than $30,000. 

She is charged with fraudulently inducing more than $275 million in investments between February 2019 and March this year — more than half the $520.9 million CaaStle raised since it was founded 14 years ago. 

There were some close calls along the way.

In October 2023, Hunsicker was almost caught when an auditor approached her about a false report that she gave to an investor. 

“During a call with the audit firm, Hunsicker falsely claimed that she had created the fake audit in connection with a lecture that she gave at Princeton University, and that sending the audit to Investor-2 had been a one-time error, unrelated to the solicitation of any investment,” the indictment said. “In fact, there was no such lecture, and Hunsicker had provided two fabricated audits to Investor-2 while soliciting an investment from Investor-2. Just a few hours before the call with the audit firm, Hunsicker had conducted internet searches for ‘fraud,’ ‘created an audit firm fake.’”

A year later, Hunsicker was out in the market with a new venture — P180, a partnership with industry veteran Brendan Hoffman. 

Hoffman was keen to invest in fashion brands, plug them into CaaStle and use rental to boost profits by side stepping steep markdowns on slow-moving inventory. 

P180 did start to do its dealmaking, linking up with Altuzarra last year. But as P180 was gearing up for its biggest deal — buying control of the publicly traded Vince Holdings — Hunsicker’s role at CaaStle was already unraveling. 

She was removed as chairman of CaaStle in December and, although she remained chief executive officer, she was prohibited from taking any actions on behalf of the company. 

Hunsicker is alleged to have had other motives for P180. 

The government said Hunsicker “intended to sell millions of P180 securities — in the form of shares and convertible notes — to existing CaaStle investors and then to funnel that money back to CaaStle disguised as payments by P180 for the use of CaaStle’s technology.” 

“But just as she had done to raise money for CaaStle, Hunsicker attempted to raise money for P180 by providing prospective investors with false information regarding CaaStle’s commercial success,” the indictment said. “In addition to repeating affirmative misstatements about CaaStle’s revenue, income, and operating profit, Hunsicker also failed to disclose that her prior representations regarding CaaStle’s financial performance — including those made through fake documents – had been false and thus that P180 would not have the strong commercial engine in CaaStle that Hunsicker claimed.”

Hunsicker used false information about CaaStle’s success to raise about $30 million for P180, as well as a $20 million personal loan from a bank, according to the indictment. 

Even as the wheels were coming off, Hunsicker tried to sell $19 million in CaaStle shares in February to an investor, whom she continued to court even after law enforcement officials seized her electronic devices in March. 

When P180 sued the rental company in New York state court in April, the company said: “Nothing about CaaStle was true. CaaStle is one of the largest frauds in history and will live in infamy alongside the likes of Theranos, [Bernie] Madoff and Enron.”

CaaStle filed for Chapter 7 bankruptcy on June 20 and is expected to be liquidated. 

For Hunsicker, who was once a judge on a “Project Runway” spin-off, featured on Crain’s New York Business “40 Under 40” list and selected as one of Inc.’s “Most Impressive Women Entrepreneurs,” it’s been a hard fall and one that is still reverberating through fashion — although without the impact that it would have had if CaaStle’s business were really as large as advertised.

“Given that both fashion brands and women entrepreneurs have a harder time attracting investment capital than stereotypical tech guys with a startup, this may have indirect negative effects for the industry,” said Susan Scafidi, founder and director of the Fashion Law Institute at Fordham Law School. “Whatever the ultimate truth of the allegations, it’s sad to see another female founder go up in flames.”