CaaStle, the once-promising fashion technology startup, is under intense legal and financial scrutiny as new lawsuits and fraud allegations come to light. The company, known for powering clothing rental platforms, is now being sued by a key partner and a supplier—adding to the fallout from earlier accusations of financial misconduct involving its founder, Christine Hunsicker.
The lawsuits follow a turbulent period for the company. Hunsicker resigned from her role as CEO and left the board in the wake of an internal investigation launched after accusations of financial wrongdoing. Now, the company is facing serious allegations from former business allies and considering bankruptcy as it struggles to survive.
Lawsuit Alleges “Nothing About CaaStle Was True”
One of the most serious legal actions comes from P180, an investment vehicle created to fund companies using CaaStle’s proprietary technology. In its lawsuit, P180 claims CaaStle misrepresented its financial health and business operations, leading P180 to raise money and take on loans under false pretenses.
According to the suit, “Nothing about CaaStle was true.” It alleges that CaaStle concealed key financial details while pressuring P180 to raise capital and even merge with the struggling company. The lawsuit says P180 ultimately acquired certain assets based on false information and has since suffered over $58 million in damages. The filing seeks to unwind corporate ties between the two companies and recover the lost funds.
The fallout led P180’s investors to take control of its board, a move indicating deep internal frustration and mistrust.
Apparel Company EXP Topco Also Sues for Breach of Agreement
In a separate legal filing, EXP Topco, an apparel supplier, is also suing CaaStle. The company alleges that CaaStle failed to uphold the terms of a settlement agreement related to copyright infringement. Specifically, EXP claims that CaaStle did not make the required payments agreed upon in the settlement.
Both lawsuits add to growing concerns that CaaStle’s financial and legal issues are more widespread than initially believed.
According to Axios, rumors are circulating about a potential class-action lawsuit involving an investment firm that directed retail investors to back CaaStle. Although the specific investor has not been named, the prospect of broader legal action suggests that more stakeholders may feel they were misled by the company or its financial backers.
Axios was the first to report CaaStle’s financial struggles a month ago. Since then, the company has reportedly furloughed employees and secured $2.7 million in emergency financing to support a possible bankruptcy filing.
CaaStle raised over $530 million in total funding, including a $43 million round in 2019, according to data from PitchBook. If most or all of that funding has been lost, it could mark one of the largest startup fraud cases in recent history.
Employees Say Financial Problems Were No Surprise
Two former CaaStle employees told reporters they were not shocked by the company’s financial collapse, although they said they were unaware of any fraudulent activity. One anonymous ex-staffer recalled that leadership rarely discussed company performance.
“I don’t recall any updates about how the company was doing financially,” the employee said. “Everyone kind of laughed it off and said, ‘We probably don’t make any money.’”
When asked about the fraud allegations, the same former employee added, “I don’t think anyone expected it.”
As the company explores bankruptcy and faces escalating legal pressure, CaaStle’s once-bright future appears dimmer than ever. If the fraud allegations are proven true, it could become a cautionary tale rivaling even the Frank-JPMorgan scandal, where the founder was recently convicted of defrauding investors out of $175 million.
