San Francisco CEO Sentenced to Three Years for Defrauding Banks and Investors over $ 8 Million | USAO-NDCA

SAN FRANCISCO – Andrew Chapin was today sentenced in federal court to 36 months in prison after pleading guilty to wire fraud, bank fraud and securities fraud, Acting United States Prosecutor Stephanie M has announced. Hinds and Special Agent in Charge of the Federal Bureau of Investigation Craig D. Fair. Chapin was also ordered to pay more than $ 8 million in restitution to his victims. The sentence was handed down by US District Judge Maxine M. Chesney.

Chapin, 33, from San Francisco, started a business in Boston and in 2016 moved it to San Francisco and renamed it Benja Inc. He was the CEO of Benja. As a digital ad company, Benja provided “purchasable media” by placing digital ads for a company’s overstock products that allowed shoppers to purchase products within the ad itself without being redirected to. another website.

From June 2019 to September 2020, Chapin was looking for investors and additional lines of credit for Benja. He told creditors and potential investors that Benja generated $ 6,200,000 and $ 13,200,000 in income in 2018 and 2019, respectively, and signed big deals with many well-known national sportswear companies to place. advertisements for their excess inventory.

Chapin admitted in his plea agreement that these statements were false. He further admitted that he had no contract with these companies and that he had falsified Benja’s income. When appealing to an investor in Benja, Chapin admitted to arranging for people to pose as employees of well-known national companies in order to reinforce Chapin’s misrepresentation about doing business with the companies.

Chapin explained in his plea agreement that he repeatedly submitted false information about Benja to a victim bank to obtain a line of credit totaling $ 5,000,000. Chapin took advances on his company’s line of credit and used the money to pay off creditors and personal credit cards and put money into his personal cryptocurrency exchange account.

Chapin also admitted that his false statements prompted investors to fund Benja. His false statements generated investments of $ 1,000,000 from a venture capital firm and $ 1,800,000 from a simple agreement for future equity (SAFE) fundraiser involving several individual investors. To secure these investments, Chapin created documents showing that Benja had millions in income and accounts receivable from businesses that had never contracted with Benja.

In an example described in his plea agreement, on March 23, 2020, Chapin directed a New York VC firm to Benja’s virtual data room which displayed a spreadsheet showing that the total revenue of Benja in 2019 was over $ 13,000,000 and also listed contracts with national sportswear companies that provided over $ 7,000,000 of Benja’s total income in 2019. Benja, however, had no contracts with the sportswear companies. sports clothing. Chapin made the spreadsheet. Chapin also admitted that on a referral call he paid a Benja employee to pose as the representative of a national running shoe company and arranged for another person to impersonate. for the representative of a national sportswear company. The venture capital firm relied on these false claims and invested $ 1,000,000 in Benja. Chapin used the money to pay a creditor.

Chapin admitted to defrauding individual investors as well. In his plea deal, Chapin admitted that in November 2018 he sent false financial statements to an individual investor which reflected that Benja had income in excess of $ 4,000,000 in 2018. Chapin told the individual that a venture capital firm in St. Louis, Missouri, was considering an investment of $ 1,500,000. investment in Benja, even though Chapin knew that the company had already refused to invest in Benja. Chapin also arranged for someone to pose as the director of the St. Louis venture capital firm on a referral call with the investor. The impersonator told the individual investor that a third party verified Benja’s financial data and made client referral calls about Benja that produced positive results. Chapin then provided false contact information for the director of the St. Louis venture capital firm, which allowed Chapin – not the director of the venture capital firm – to answer the individual’s questions regarding the Chapin shareholders agreement. As a result, the individual investor signed the shareholders’ agreement and purchased 1,278 common shares of Benja for $ 100,000. Chapin used the money to pay personal credit card bills and to fund his personal cryptocurrency accounts.

In a sentencing memo, the government accounted for losses due to Chapin’s bank fraud, his fraud at a venture capitalist, and his fraud at 11 individual investors. The amount of the loss resulting from Chapin’s frauds was $ 8,069,900. Of that amount, at least $ 1.8 million came from the fraud of individual private investors.

Chapin was originally charged by federal complaint on November 23, 2020, and later by briefing on May 27, 2021. He pleaded guilty on June 16, 2021, to bank fraud in violation of 18 USC § 1344, wire fraud in violation of 18 USC § 1343, and securities fraud in violation of 15 USC §§ 78j (b) and 78ff, and 17 CFR § 240.10b-5.

The case is being pursued by the Corporate Fraud Strike Force of the US Attorney’s Office. The charge is the result of an investigation by the Federal Bureau of Investigation. The United States Attorney’s Office and the Federal Bureau of Investigation thank the San Francisco regional office of the Securities and Exchange Commission, which conducted a parallel investigation.