Just four years ago, the climate-friendly fintech startup suction was on the verge of a $2 billion public list. One startup's board member has now pleaded guilty to wire fraud, and one of the co-founders has been arrested for conspiring to fraudulent investors, according to a federal criminal complaint filed by the US Power of Attorney Office in the Central District of California.
Fintech startups have been under federal scrutiny for questionable financial and carbon accounting practices for many years. However, the new complaints shed light on a series of loans obtained using fraudulent tactics.
Suction co-founder Joseph Samberg was arrested Monday after allegedly conspired to fraudulent two different funds of $145 million. On the same day, Ibrahim Arsini, a former independent board member of the company, pleaded guilty to fraudulently forged documents to help Samberg secured a loan, according to federal prosecutors.
If convicted, Samberg will face up to 20 years in prison. According to the US Lawyer's Office for the Central District of California, he works with prosecutors, but Alfseini faces the same biggest penalty.
The startup has gathered a long list of famous investors over the years, including actors Orlando Bloom, Leonardo DiCaprio, musician Drake and basketball coach Doc Rivers. The company wanted to make it public via SPAC in 2021, but the contract dropped in 2023.
Sanberg and Alhusseini have been accused of scaming two different investors. In 2020, Sanberg negotiated a term for a $55 million loan with an unnamed investor fund. He pledged 10.3 million shares of the false stock as collateral. The Investor Fund has requested Samberg to find a third party if the fund wanted.
According to prosecutors, Alfuseini was a third-party suspect. Sanberg is said to have convinced him to sign a Put Option of Stocks in January 2020.
However, if Alhusseini exercised the option, he didn't have $55 million to pay the fund, federal prosecutors say. Sanberg and Alhusseini are said to have worked with Lebanese graphic designers to expand Alhusseini's assets from $80 million to $200 million, mimicking fake brokerage accounts and bank statements.
With the put option in place, the fund lends $55 million to Sanberg. Alhusseini received $6 million from the loan as a premium payment to guarantee repayment in case the aspiration was made.
In November 2021, Sanberg is said to have refinanced the loan with a second unknown investor fund. This time the loan was $145 million.
Again, it is said that Alhusseini has agreed to the Put option. This time, it's $65 million if 10.3 million shares are no longer worth it. And, like previous loans, Sanberg and Alhusseini are said to have shown a forged document that the second fund inflated Alhusseini's assets. This time, Alhusseini received $6.3 million in premium payments.
According to his judicial agreement, Alfseini received a total of $12.3 million from the scheme.
A year later, Sanberg failed to lend a $145 million loan. Then, in the spring of 2023, he defaulted again. The fund that provided the loan exercised a put option with Alfseini, who had not purchased the shares. According to the US Lawyer's Office, the fund lost at least $145 million.