Christine Hunsicker was in her friend’s Palo Alto, California, backyard in 2011 wondering how every woman could have the kind of infinite clothing closet she’d grown up with. As a kid in rural Pennsylvania, her family wasn’t particularly wealthy, yet she was always playing dress-up in outfits, like a penguin-print maxi dress or a shimmering sequin skirt, made by her seamstress aunt. A clothing-rental subscription company could be a blockbuster business, she thought. She even had a name for it, inspired by a character from a book she’d once imagined but never wrote: Gwynnie Bee.
Hunsicker was obsessed with Rent the Runway—the startup that had sparked the clothing-rental category two years earlier. Gwynnie Bee would essentially be the same idea, just for a different crowd. Rather than renting out designer evening wear and office essentials, she’d focus on zany styles such as psychedelic flower-print moto jackets and paint-splatter dresses for plus-size women.
At the time, direct-to-consumer e-commerce startups, from makeup and pet food to toothbrushes, were raising billions of dollars from venture capitalists. Hunsicker, who’d previously worked at several tech startups, knew how to use the era’s lingua franca to get investors to open their wallets. She also had gotten her hands on a copy of an early Rent the Runway pitch deck. She’d go on to innovate, curate and revolutionise her way to millions in funding injected by companies including Sherpalo Ventures, an early-stage investment firm run by a founding member of Google’s board, and KCP Capital in Dubai. In a brainstorming session with her employees, she preached one of her core beliefs when it came to building a business: “You can’t disrupt without disrupting.”
But seven years into Gwynnie Bee, she hadn’t disrupted much, so Hunsicker gave her original business an ambitious twist. The real money at the time was in enterprise software, known as software-as-a-service. With its immense scalability and recurring revenue streams, SaaS startups such as Slack and Dropbox were being valued at more than $5 billion. Instead of her company only renting out clothes, it could become retail’s equivalent of enterprise software—selling the technology, the logistics and the physical infrastructure to any brand that wanted to run a clothing-rental business but didn’t want the hassle. If she could make that leap, she wouldn’t be playing with millions, but billions. She told employees this was the plan all along.
Hunsicker renamed the company CaaStle Inc.—meant to be a play on what she dubbed “clothing-as-a-service”—and relegated Gwynnie Bee and a second, budget-friendlier brand, Haverdash, to become the company’s private-label offerings. CaaStle would solve a problem for beleaguered mall retailers desperate for revenue: typically when brands had excess inventory, they’d liquidate it at steep markdowns. With CaaStle, they’d be able to monetise it not just once but many times over by renting out the clothing, including unused inventory from past seasons.
CaaStle would build rental websites for its clients’ brands, then operate the unwieldy back-end logistics, including distribution centres that handled an endless loop of clothing cleaning, storage, shipping and returns. CaaStle’s overhead costs would be enormous, but Hunsicker knew how to raise capital. By the time she flew to Las Vegas in 2018 to deliver a keynote speech at Shoptalk, one of the retail industry’s biggest annual events, she declared that her freshly pivoted company would steal market share from Amazon.com Inc. “Disruption that isn’t,” one of her slides read.
Within months, Hunsicker nabbed a half-dozen mall retailers and new investors. She also had big news to share with her employees: The company was on the verge of becoming a unicorn. “Our valuation now is $950 million,” she said during one meeting, according to former employees. Hunsicker scored television appearances on CNBC, where she was declared “the CEO changing retail with clothing rental”; took the stage at a Vanity Fair event; and persuaded John Hennessy, the chairman of Alphabet Inc. and former president of Stanford University, to become an investor and board member.
Some CaaStle then-employees say they had their doubts at the time. Why, they whispered, wasn’t their chief executive officer sharing basic financials with them? If the company was doing so well, those who did have access to the numbers wondered, why hadn’t sales improved in more than two years? Weren’t the warehouses still half-bare? “I didn’t see how we were going to make money,” says one of Hunsicker’s former executives who asked not to be named so they could freely discuss private business matters. “They were constantly changing the business model.”
By March 2025, employees weren’t the only ones with serious doubts. Officials from the US Department of Justice and the US Securities and Exchange Commission allege that for six years, Hunsicker had lied to her investors about CaaStle’s performance and financials, even though she’d kept raising millions more in funding until the very end. An indictment handed down by the Justice Department outlines allegations of a brazen fraud scheme of more than $300 million in which she raised money by forging income statements and falsifying audit reports, reducing her losses and ballooning her revenues. Prosecutors laid out allegations that, if true, amount to one of the biggest financial heists in recent tech history, putting her up there with Theranos founder Elizabeth Holmes. In a separate lawsuit filed by the SEC, the agency accuses Hunsicker of exaggerating her operation’s revenues more than 70-fold.
Dressing Up the Results
When reached for comment, a representative for Hunsicker, who has pleaded not guilty and is awaiting trial after being released on a $1 million bond, referred to a statement from her lawyers Michael Levy and Anna Skotko issued in July: “Although Ms. Hunsicker has been fully cooperative and transparent with the Department of Justice, the US Attorney for the Southern District of New York nonetheless has chosen to present to the public an incomplete and very distorted picture in today’s indictment. There is much more to this story, and we look forward to telling it.”
“This was not a case of business missteps,” investor KSV Global wrote in one of the civil lawsuits from Hunsicker’s investors accusing her of lying about her company’s financials. “It was a meticulously orchestrated deception, engineered to attract funding and inflate valuation at the expense of truth.” (KSV won the suit on a default judgement and was awarded upwards of $46 million. Hunsicker has since asked the court to vacate the default and reopen the case.) Interviews with more than 30 former CaaStle employees, business partners and investors, most of whom spoke under condition of anonymity so they could discuss private business matters, and dozens of internal documents suggest that Hunsicker was a hypercompetitive manipulator who blew past the startup ethos of fake-it-till-you-make-it. “There were times when I saw her walk right up to the line of what would be considered vision, and what would be considered false—just completely outside of reality,” says one of her former employees. “Where does the vision stop and the delusion begin?”
Around the time Hunsicker rebranded her company as CaaStle, she showed up to the company’s New York office with a new look. For as long as her employees had known her, Hunsicker had mousy, shoulder-length soccer-mom hair and often dressed in an inoffensive suburban office-park uniform of blouses and trousers. She’d even worn flip-flops held together by duct tape, and those close to her would beg her to look more professional for the sake of the company’s image. “Christine was the antithesis—like as a person—the antithesis of fashion,” says Kaeya Majmundar, one of her former employees. “It would be shocking for her to start pitching a fashion business at all. Period.”
There was a collective gasp when Hunsicker strode into headquarters that morning. Her hair was buzzed short on the sides, rising into a pompadour. She started wearing loose jeans, tees and leather jackets, like the tech girlbosses in California. She began going to conferences wearing blazers in leopard and snakeskin prints, with the occasional shock of ruby-red lipstick for a photo shoot. A pair of clear, thick-rimmed eyeglasses completed the look.
Hunsicker grew up in a small farming town where her dad worked in a steel mill and her mom prepared people’s taxes. She attended schools she’s described as some of the worst in the country, so she devoted herself to sports, playing varsity soccer, basketball and field hockey, where she said she developed a fierce competitiveness that even she’s admitted may be extreme. “Someone who worked for me said, ‘You’re the most competitive person I’ve ever met, and I don’t mean that as a good thing,’” Hunsicker said in a 2022 book she was interviewed for about women and leadership.
A couple of years after graduating from Princeton University, she got a data analyst job at a tech services company in New York, where she was eventually laid off. Soon, she was introduced to a fellow Princeton alum named Brian O’Kelley, a tech executive who was impressed by her marketing instincts, and he hired her at an enterprise software company called Cetova. O’Kelley says the two embarked on an affair that would end his marriage and her relationship at the time. Hunsicker often told O’Kelley that she was like Dagny Taggart, the brilliant industrialist heroine in Ayn Rand’s libertarian bible Atlas Shrugged, who exhibits a supreme belief in her abilities and refuses to compromise her ideals even when everything falls apart. “She would say it’s all of our job to be selfish, and if you’re not selfish, you’re weak and you’re going to get taken advantage of,” O’Kelley says.
A year before they got married in 2005, O’Kelley brought Hunsicker over to Right Media, where he was developing the internet’s first advertising exchange. Hunsicker rose to become president and chief operating officer, working with Jaswinder Pal Singh, O’Kelley’s former professor at Princeton, who O’Kelley, the company’s chief technology officer, had brought on as an adviser. Yahoo! Inc., then one of the biggest internet companies in the world, wanted to acquire it in 2007, but O’Kelley opposed the sale because he thought it was too early to exit. The board fired O’Kelley and made Singh the interim CTO. Yahoo then acquired Right Media for $850 million. (Singh declined to comment.)
In the years after his ouster, O’Kelley said he had been fired because of a conflict with the CEO about the company’s future. O’Kelley now says Hunsicker had a hand in forcing him out as their marriage was falling apart. (A representative for Hunsicker said in a statement: “It’s obvious that Christine’s ex-husband has a weird ax to grind over his exit from Right Media and has told different stories about his departure. He will blame anything and anyone for it regardless of the truth.”)
After the divorce, the two rarely spoke, and O’Kelley went on to found AppNexus, a Right Media rival that he sold to AT&T Inc. for $1.6 billion in 2018. He describes his ex-wife as cunning, with little regard for ethical boundaries. “I still can’t understand what the hell I was thinking or how that happened,” O’Kelley says of their marriage. “At some level, she takes pleasure from seeing her power and what she can get away with.”
At Yahoo, another programmer entered Hunsicker’s orbit. George Goldenberg was a Stanford-trained engineer who had a command of ad marketplaces and inventory systems and became her choice to help her build the tech infrastructure for her new project: a plus-size clothing-rental service. Hunsicker had become COO at drop.io, an online file-sharing company, but after it sold, she left to turn the side project into a full-fledged business with Singh and Goldenberg. (Goldenberg did not respond to a request for comment.)
Hunsicker set off to raise money for what by then was named Gwynnie Bee. Former employee Majmundar says Hunsicker seemed to adopt a mindset that founders often do, pursuing growth at all costs. “I don’t really care what it is, but I need it to be bigger. Not that I want it. I need it. And I’m willing to do absolutely anything it takes to get there,” she says.
Hunsicker began raising money at a frenetic pace, attending multiple dinners every week to court investors. Rather than approach big firms for major funding rounds, Hunsicker preferred to quietly add small investors one by one. She went to angel investors and built a network of rich friends who could write big checks. Hunsicker would give them the pitch and the price, and tell them she was always open to take on more funds, according to a person with knowledge of her fundraising tactics. In 2014 she was introduced to hedge fund billionaire Bill Ackman and persuaded him to put in a small personal investment.
Among her investors was Monica Graham, a former hedge fund manager who wrote Hunsicker checks for millions of dollars. Graham asked her out, and the two dated for a time. At her home in New York’s Hamptons, Graham would host parties for her friends that Hunsicker and her early employees would use to find new contacts and raise more funds for Gwynnie Bee by mingling with the wealthy crowd, according to people familiar with the matter. Hunsicker even met the Clintons in January 2016, posting a photo with them. “Bill and Hillary were jazzed for the photo op!” reads the caption. (Graham declined to comment.)
As the investor checks kept coming, Hunsicker hired a publicist. She was featured on the Today show’s website and scored an appearance on CBS This Morning in 2016, where she said she’d delivered 3 million rental boxes. A month later she did an interview with Forbes, which declared Hunsicker “no ordinary online fashion entrepreneur.”
At headquarters, meanwhile, it was becoming clear that the service wasn’t attracting enough subscribers. In a feedback session with one department near the end of 2016, an early employee bluntly expressed concerns: “Everyone feels like the company is doing very poorly,” the employee told Hunsicker, claiming she’d misled him about the company’s financials when he’d interviewed for the job. “People know, and people are scared.”
Then came Hunsicker’s big break. She was selected as one of the hosts of Project Runway: Fashion Startup, a Shark Tank-esque spinoff of the popular fashion design show. Contestants would pitch their idea to a panel of fashion and beauty bigwigs including designer Rebecca Minkoff and Birchbox co-founder Katia Beauchamp—and, in the role of no-nonsense tech dynamo, Hunsicker. She tried to outmaneuver the other judges, who were also competing to invest in these companies, by bluffing to them backstage about her level of interest. “We would speak off camera, and then I would come on and do something completely different to what I had just committed to,” Hunsicker said at the time in a promo video for the show.
Investors, many of whom knew little about fashion or retail, couldn’t get enough of Hunsicker, who had tech bona fides and knew just how to deploy industry jargon and dangle enviable financial projections. In the spring of 2017, she gathered her 150 or so employees at Gwynnie Bee’s headquarters inside an old Macy’s warehouse in New York to spill the big news about Hennessy—the “Godfather of Silicon Valley,” as venture capitalist Marc Andreessen once called him—becoming an investor and a board member. “It’s quite a coup,” she told her staff.
When the company rebranded itself as CaaStle the following year, Hunsicker upgraded its digs. She hired dozens of new engineers, merchandisers and marketers, and moved her growing staff to a sleek office building in Midtown Manhattan outfitted with a rooftop terrace, a fitness center and a golf simulator. She told her employees about the importance of communication, motivation and passion. They had to be data-driven, collaborative and tenacious if the company was to succeed, she said. “Together, we foster an environment that is direct, transparent and trusting,” one internal presentation on office culture stated, “in which honesty, respect, ownership and accountability are paramount in everything we do.”
Beginning in late 2017, Hunsicker told employees and friends that she had suffered a brain injury. While trying to take a bathroom mirror down, it popped off and hit her on the top of the head. She told them she’d started to experience short-term memory loss, even asking an employee to follow her around the office to take notes at her meetings, so she’d be able to reference what she’d said. Hunsicker told her board of directors, too, and stayed on as CEO, according to a person with knowledge of the discussions.
Meanwhile, Hunsicker was luring new clients, mostly mall retailers desperate for new revenue. Ann Taylor, Express and New York & Co. signed on, along with a couple of smaller, design-forward brands including Vince and Rebecca Taylor. With investor money flowing in, CaaStle invested in distribution centers in Ohio and Arizona, engineering talent in India, and more technology and logistics staff in Mountain View, California. It started a branding department and expanded its merchandising division. Hunsicker even persuaded landlords of the Ohio distribution center to reduce a deposit by selling them on her startup’s vision. But as Hunsicker spent that new capital, her executives admitted in a 2018 internal presentation that they were having trouble bringing in revenue. “Did not hit our 2017 Acquisition targets,” reads a note that the executives prepared. “Were aware of this by Q2.”
Hunsicker created an enemy for her staff to rally against: Rent the Runway and Jennifer Hyman, its co-founder and CEO. The hot startup was valued at $1 billion and was in the early stages of planning an initial public offering. Magazines, including the New Yorker, wrote gushing profiles about Hyman, a Harvard Business School graduate, as the face of subscription commerce. Representative Alexandria Ocasio-Cortez (D-NY) applauded Hyman when the company equalized benefits for hourly and salaried employees. The New York Times said using Rent the Runway was “transformational bliss.”
Those close to Hunsicker describe her as fixated on Hyman, who at the time she had yet to meet. Hunsicker regularly criticized Rent the Runway’s technology and logistics to investors, claiming its business model didn’t work, according to a person familiar with the talks. “It was never friendly competition. We’re going to do better than them. We’re smarter than they are,” says one of Hunsicker’s former employees about their old boss. “That’s who we want to knock out of the game.”
According to the lawsuit filed by the SEC, in 2019 Hunsicker’s finance department sent her an income statement with all the numbers from the previous fiscal year: The company was losing more than $47 million annually with just $23 million in revenue. Gwynnie Bee had been hemorrhaging money for years, and now CaaStle—with its high labor and shipping costs and client revenue-share agreements—wasn’t bringing in enough revenue either. So, the SEC alleges, Hunsicker whipped up a new income statement, one that cut her losses to $24 million and almost tripled revenue to $72 million, and sent the fake document to at least 10 other investors. They bought it, and millions in new capital began flowing in. Officials from the Justice Department and the SEC allege that this was the first instance of Hunsicker’s altering her books and laid out in an indictment and lawsuit a pattern of consistent manipulation and fabrication of CaaStle’s finances over six years.
By early spring 2020, suddenly home-bound office workers didn’t need fresh outfits and women didn’t need to rent dresses to attend weddings over Zoom. Hunsicker furloughed some of her corporate staff. Former employees say she and others instructed account managers who were dealing with clients to spin a positive story out of the data, even as it was clear to them that every prized metric—conversions, retention, utilization, engagement—was in decline.
Hunsicker needed to raise more money and went to existing and new investors for help. Court filings later showed that she’d amassed an impressive list of financiers, including a venture capital firm led by early Facebook investor Jim Breyer; hedge fund billionaire Seth Klarman’s nonprofit; and the investment manager for Henry Kravis, the billionaire co-founder of one of the world’s largest private equity firms, KKR & Co. (None of these investors responded to a request for comment.)
In April 2020, according to the SEC lawsuit, an investor asked for a status update, but CaaStle’s financials had deteriorated even more. So Hunsicker allegedly put together another fake income statement, according to court documents. Ninety-million dollars, she wrote, with minimal losses. Authorities accused her of using those same numbers to persuade an investor to wire her an additional $1.5 million. In the spring of 2021, Hunsicker went on the hunt again, telling one of her existing investors that she was looking to raise as much as $20 million more in funds. And again, the SEC alleges, Hunsicker sent a fake income statement, in which she wrote: “I would love for you to do some more.” The investor wired her an additional $2 million.
Meanwhile, Hunsicker’s reputation as a badass woman in tech only continued to grow. She racked up media accolades from Inc. magazine’s “Female Founders” and Fast Company’s “World’s Most Innovative Companies.” Employees grumbled that the business didn’t make any money and resorted to asking the human resources department about the company’s true valuation, but they couldn’t get a straight answer. Neither did some investors, who complained that Hunsicker was slow to follow up even when she promised to. One says they noticed that the financials Hunsicker shared in an Excel spreadsheet looked like something thrown together in a high school computer lab, not one created by a sophisticated multimillion-dollar company.
Hunsicker’s personal financial strains also mounted as she put more money into her business. She’d gotten married again—this time to Phaidra Knight, a former rugby player for the US national women’s team. The couple lived in a newly renovated 6,500-square-foot complex with a koi pond and an indoor spa in Lafayette, a quiet township in the rolling hills of northern New Jersey. Hunsicker took out a $20 million loan from Emigrant Bank to put back into CaaStle and gave her shares as collateral, according to state filings and a person with knowledge of the matter.
In March 2021, Hunsicker scored a high-profile deal that bolstered CaaStle’s reputation. Ralph Lauren Corp. agreed to allow Hunsicker to operate the Lauren Look, a rental service for women’s wear. The designer’s son and company’s chief branding and innovation officer, David Lauren, gushed about its potential. “Ralph Lauren is making a business model out of it,” Lauren told Women’s Wear Daily at the time. “We’re doing a lot more than just partnering with a company. We’ve built a whole style guide around it, we’ve done special marketing programs around it.” (A spokesperson for Ralph Lauren declined to comment on the partnership.)
Even so, that fall, Hunsicker’s investors were growing concerned that she wasn’t sharing enough information with them and told her she needed to send them audited financials along with more regular updates, according to court filings. Investigators say that when investors pressed for 2021 numbers, she told them that it was delayed because CaaStle wasn’t high on the auditing firm’s priority list. According to the SEC complaint, what investors didn’t know was that the auditor, BDO USA, had already provided its report, showing $18.6 million in revenue and $32.3 million in operating losses.
The SEC claims that Hunsicker figured out a workaround: She told her finance team to send her the audit report that had already been published, but to email a draft of it in Word. She bumped up the numbers and removed the auditor’s warning that the company was at risk of folding, then added the word “DRAFT,” saved it as a PDF and sent it to her investors. According to the SEC lawsuit, she added a note: The audit firm was still working through versions of the report, but the draft was “further along than expected.” Her document boasted CaaStle’s best numbers yet: more than $120 million in revenue. It went out to at least eight investors, and Hunsicker sent a “final” version that went to more than a dozen. This time, the SEC alleges, she appended an auditor’s signature to her doctored report, lending some relief to her anxious investors.
Hunsicker, meanwhile, was losing some of her most vital retail partners who weren’t seeing the dollars they were promised. Ralph Lauren, her star signing, decided to fold its rental project and didn’t renew its contract. Bloomingdale’s and Banana Republic did the same. When Express, one of its longest-standing customers, wanted to exit its deal, CaaStle began writing checks of $250,000 per month to the retailer. Hunsicker told staff that it was paying Express for “utilisation rights,” which meant she was paying the brand to use its inventory, say former employees. (Bloomingdale’s, Banana Republic and Express did not respond to requests for comment.)
The SEC complaint says that while revenue dried up, Hunsicker announced to her investors a new milestone: CaaStle was suddenly profitable. Once again, investors clamored for audited results, and she complied. She told them revenue doubled from her last report to $238 million, and the money flowed in. One prospective investor went to the investment committee the day after receiving the report and ultimately wired more than $7.5 million. Again, the numbers she’d provided were fake, the SEC alleges.
By now, Hunsicker was getting sloppy. According to authorities, one investor noticed errors in the report and emailed the real auditor. BDO allegedly told the investor that it hadn’t prepared the report, then demanded an explanation from Hunsicker. She needed a doozy of an excuse for this one and allegedly searched the internet for “created an audit firm fake,” according to court documents. Hunsicker told the company she’d mistakenly sent the investor a marked-up version of the report that she was going to use for a lecture she was giving at Princeton on “ethics and entrepreneurship,” the SEC alleges. The investor didn’t press any further and cashed out their shares.
Hunsicker needed a new way to bring in revenue. This time she’d recruit influencers to CaaStle to help them build their own personal rental websites using clothes from her company’s existing inventory. All it would take is one big-name influencer to get things rolling, then everything would be OK, she told people close to her. In 2024 she hired a team of business development executives with six-figure salaries to build a roster of influencers, but the new business model left staff baffled, and the service, which mostly attracted small influencers, flopped. Cash was drying up, and former staff say that Hunsicker’s management team told employees to delay payments to vendors that were sending invoices.
Even so, in September 2024, Hunsicker doubled CaaStle’s revenue one more time and declared a cash balance of approximately $113 million, authorities allege. The real statements showed the company in a dire state, with about $16 million in revenue, its largest losses to date and less than $1 million in cash remaining. In her haste, Hunsicker had prepared a messy report that was missing a page and contained notes that were out of date, according to the SEC lawsuit. She then offered two investors a chance to see the document in her office in October 2024.
One of those investors, Jed Lenzner—who manages KKR co-founder Kravis’ investments—noticed those errors. According to a person familiar with the situation, Lenzner called the auditor BDO, which told him that it hadn’t prepared the report he’d seen in her office—in fact, CaaStle was no longer a client. After Lenzner confronted Hunsicker, she offered him a choice: He could do nothing, because there was value in the company, or he could redeem his investment in the company. Lenzner chose neither and instead reported Hunsicker to her board of directors.
Lenzner’s whistleblowing didn’t lead to a full-blown ouster. Instead, in December, CaaStle’s board removed Hunsicker as a member but kept her on as CEO. The board began an internal investigation, hiring law firm Cravath, Swaine & Moore to look into any misconduct, and prohibited Hunsicker from fundraising or signing new contracts. Hennessy, her star board member from Alphabet, stepped down, distancing himself from the impending scandal. (Hennessy did not respond to requests for comment.) The company purchased a $2 million insurance policy, effective Dec. 18, to protect directors and officers from fiduciary personal losses if they were sued, according to a copy of the policy. The SEC claims that the board didn’t inform investors that any of this was happening.
At a board meeting in January, Singh, as the new chairman, stated the obvious: The business was unlikely to become profitable. According to minutes from the meeting, Singh encouraged his peers to focus on another new opportunity that Hunsicker had conjured up. They’d team up with a new company she’d co-founded called P180, which would invest in brands and work in tandem with CaaStle. Hunsicker was the only way they could close that deal, he said, which needed to happen for CaaStle to have a chance at survival. Even so, Singh and Goldenberg had already been cashing out their shares in the months prior—Singh pulled out $6 million, and Goldenberg, close to $3 million, according to bankruptcy filings.
Later that month, Hunsicker gathered her staff at headquarters to announce a round of layoffs and tell the remaining employees that CaaStle would refocus on partnerships through the P180 business. Hunsicker’s P180 co-founder, veteran retail executive Brendan Hoffman, started working out of the CaaStle office, but employees remained confused about the arrangement and how it would work. “Big opportunities have just come our way in that space,” Hunsicker told them. “It resonates a ton with brands and retailers, and it’s going to help us build the new economy faster and better.” (Hoffman did not respond to a request for comment.)
During this time, Hunsicker kept trying to raise funds for CaaStle, even though she was banned by the board from doing so, prosecutors allege, and she started selling off $13 million of her shares and convertible notes in her companies. According to the indictment, Hunsicker tried after that to jettison an additional $19 million in her own shares, and following a meeting with an investor to discuss the potential deal, she was worried enough to type these words into an internet search: “bank fraud vs. wire fraud severity.”
Early one morning in March, officials from the Justice Department showed up at her New Jersey mansion to seize electronic devices. The US Attorney for the Southern District of New York’s office, led by its securities unit, had been investigating CaaStle for potential fraud, according to a person familiar with the probe. It’s the same branch involved in financial fraud cases including the FTX crypto scheme and the racketeering conspiracy operated by executives from Archegos Capital Management.
Several senior executives at CaaStle received subpoenas, and Goldenberg and his peers on the board prepared a letter telling shareholders they’d removed Hunsicker from her position as CEO, with Goldenberg taking over. The board review found Hunsicker had violated company policies, and the board told investors that if they’d ever received financial information from her, those numbers couldn’t be trusted. CaaStle was now “facing a severe and immediate liquidity problem,” the board said, while adding that no one else on the management team was involved in the alleged misconduct. “The performance to date has not matched what Christine claimed,” the board said in the letter. “We have learned that Christine provided certain investors with misstated financial statements and falsified audit opinions, as well as capitalization information that understated the number of company shares outstanding.”
Goldenberg and Singh, the acting board chair, convened CaaStle’s employees and told them they were being put on unpaid furlough for two weeks, effective immediately. Singh spoke to staff on a call he took from his car, absolving everyone but Hunsicker. “It’s important for you to know that no one on the management team has been found to be aware of, or complicit in, the violation of company policies.” Goldenberg told them that they were experiencing a severe cash shortage because the company loaned money to its new partner, P180. “Christine, as you know, was CaaStle’s primary fundraiser,” Goldenberg said. “She’s no longer able to perform this function.”
Then came the lawsuits. EXP Topco, which owns the Express brand, sued in New York, alleging that CaaStle had infringed on trademarks and breached various agreements. Investor KSV filed that lawsuit against Hunsicker in Florida claiming that it was “misled through false financials and doctored reports” that CaaStle’s business was booming. P180 sued CaaStle and its executives, including Hunsicker, for fraud, arguing that it would never have worked with her if management knew the truth about CaaStle’s finances, calling Hunsicker “a world-class fraudster ranking alongside the likes of Bernie Madoff and Elizabeth Holmes.” (Hunsicker has denied the allegations in a filing.)
On a Friday afternoon in July, Hunsicker showed up at a federal courthouse in downtown Manhattan to appear before a judge. She walked up to a courtroom on the fifth floor wearing a white floral button-down tucked into black pants, reminiscent of the humdrum style she’d traded in years ago. She nervously rocked back and forth on the balls of her feet as she waited to enter. She was charged with one count of wire fraud, two counts of securities fraud and one count of money laundering—each carrying a maximum sentence of 20 years in prison—in addition to one count of making false statements to a financial institution and one count of aggravated identity theft. Hunsicker pleaded not guilty to all charges.
By then, the Gwynnie Bee store had been taken down, CaaStle was liquidating its assets in bankruptcy proceedings, all employees had been laid off, and investors were trying to figure out how to recoup some of the $534 million in funding they’d sunk into Hunsicker’s company. CaaStle has listed its assets at $10 million to $50 million, but a court-appointed trustee is now sifting through its corporate remains to figure out what’s recoverable.
There’s remarkably little. The company had some patents of unknown value for things such as clothing inspection processing methods, along with some subscriber lists and domain names. There was only about $886,000 worth of its own inventory left in warehouses. It didn’t have any real estate, just leases. A liquidator has been auctioning off laundry equipment: washing machines, garment racks and rolling vinyl baskets.
Meanwhile, Hunsicker’s nemesis Rent the Runway is enduring its own recovery from the pandemic. Hyman, still running the company, says she isn’t surprised by CaaStle’s downfall. “Over the past 14 years, she copied our public statements, lied to investors about our business model, and lied about us to the designer community,” Hyman said in an email. “Now, with her paper thin veil of legitimacy torn away, the world can now see that the emperor has no clothes—not even rented ones.”
By Jill R Shah and Kim Bhasin
