San Francisco CEO Sentenced To Three Years For Scamming Banks And Investors Out Of $8 Million
Defendant Created Fake Accounts Receivables From National Sportswear Companies And Had The Companies’ Representatives Impersonated On Investor Calls
SAN FRANCISCO – Andrew James Chapin was sentenced in federal court today to 36 months in prison after pleading guilty to wire fraud, bank fraud, and securities fraud, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair. Chapin was also ordered to pay over $8 million in restitution to his victims. The sentence was handed down by United States District Judge Maxine M. Chesney.
Andrew James Chapin, 33, of San Francisco, started a company in Boston and in 2016 moved it to San Francisco and renamed it Benja Inc. He was Benja’s CEO. As a digital advertising company, Benja provided “shoppable media” by placing digital advertisements for a company’s overstocked goods that allowed shoppers to purchase products in the advertisement itself without being redirected to another website.
From June 2019 through September 2020 Chapin was looking for additional investors and lines of credit for Benja. He told creditors and prospective investors that Benja generated $6,200,000 and $13,200,000 in revenue in 2018 and 2019, respectively, and had signed large contracts with numerous 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 contracts with these companies and that he falsified Benja’s revenue. On a Benja investor call, Chapin admitted he arranged for people to impersonate employees from the well-known national corporations to bolster Chapin’s false representations of business relationships with the companies.
Chapin detailed in his plea agreement that he repeatedly submitted false information about Benja to a victim bank to obtain a credit line totaling $5,000,000. Chapin took advances on the line of credit for his company and used the money to pay off creditors and personal credit cards and to put money into his personal cryptocurrency exchange account.
Chapin also admitted his misrepresentations induced investors to fund Benja. His false statements produced investments of $1,000,000 from one venture capital firm and $1,800,000 from a SAFE (simple agreement for future equity) fundraising round involving multiple individual investors. To obtain these investments, Chapin created documents showing that Benja had millions in revenue and account receivables from companies that had never contracted with Benja.
In one example outlined in his plea agreement, on March 23, 2020, Chapin directed a New York venture capital firm to Benja’s virtual data room that displayed a spreadsheet showing Benja’s total 2019 revenue exceeded $13,000,000 and also listed contracts with national sportswear companies that provided over $7,000,000 of Benja’s total 2019 income. Benja, however, had no contracts with the sportswear companies. Chapin fabricated the spreadsheet. Chapin also admitted that in a reference call he paid a Benja employee to impersonate a national running shoe company’s representative and arranged for another individual to impersonate a national sportswear company’s representative. The venture capital firm relied on these misrepresentations and invested $1,000,000 in Benja. Chapin used the money to pay off a creditor.
Chapin admitted defrauding individual investors too. In his plea agreement Chapin admitted that in November 2018 he emailed false financial statements to an individual investor that reflected Benja had revenue of more than $4,000,000 in 2018. Chapin told the individual that a St. Louis, Missouri, venture capital firm was considering a $1,500,000 investment in Benja, although Chapin knew the firm had already declined to invest in Benja. Chapin also arranged for a person to impersonate the St. Louis venture capital firm’s manager during a reference call with the investor. The impersonator told the individual investor that a third party had verified Benja’s financials and had made customer reference calls about Benja that produced positive results. Chapin then provided false contact information for the St. Louis venture capital firm’s manager which allowed Chapin – not the venture capital firm’s manager – to respond to the individual’s questions about Chapin’s shareholder agreement. As a result, the individual investor signed the shareholder’s agreement and purchased 1,278 shares of common stock in Benja for $100,000. Chapin used the money to pay personal credit card bills and to fund his personal cryptocurrency accounts.
In a memo filed for sentencing, the government tallied the losses from Chapin’s bank fraud, his fraud upon a venture capital firm, and his fraud upon 11 individual investors. The loss amount from Chapin’s frauds totaled $8,069,900. Of that amount, at least $1.8 million came from defrauding the individual private investors.
Chapin was originally charged by federal complaint on November 23, 2020, and later by information on May 27, 2021. He pleaded guilty on June 16, 2021, to bank fraud in violation of 18 U.S.C. § 1344, wire fraud in violation of 18 U.S.C. § 1343, and securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5.
The case is prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The prosecution 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.