Defendant Falsified Financial Statements, Fabricated Accounts Receivables from Large Companies with Which He Did No Business, and Impersonated Corporate Representatives
June 16, 2021 - SAN FRANCISCO – Andrew Chapin pleaded guilty today in federal court 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, 33, of San Francisco, started a company in Boston that he moved to San Francisco in 2016 and renamed Benja Inc. Chapin was CEO of Benja. Benja was a digital advertising company that provided “shoppable media” by placing digital advertisements for companies with overstocked goods on websites which allowed shoppers to purchase products in the advertisement itself without being redirected to another website.
According to his plea agreement, from June 2019 to 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 companies to place advertisements for their excess inventory. He admitted today in his plea agreement that he had no contracts with these companies, he falsified Benja’s revenue, and he impersonated corporate representatives, or caused their impersonation, to bolster the appearance of company relationships that did not exist.
Chapin detailed in his plea agreement that he submitted false information about Benja to a victim bank to obtain lines of credit totaling $5,000,000. In one example, Chapin took advances on a line of credit and used the money to pay off creditors and investors as well as his personal credit cards, and he also transferred money to his cryptocurrency exchange account.
Chapin also admitted he made false statements to induce venture capital firms to invest in Benja. His false statements led to investments of $1,000,000 from a venture capital firm and $1,800,000 from a SAFE (simple agreement for future equity) fundraising round from multiple investors. To obtain these investments, he fabricated documents to reflect Benja had millions in revenue and account receivables from companies that never contracted with Benja.
In one example in his plea agreement, Chapin described that on March 23, 2020, he directed a New York venture capital firm to Benja’s virtual data room that displayed a spreadsheet showing Benja’s total 2019 revenue had exceeded $13,000,000 and listed contracts with well-known national sportswear companies that represented more than $7,000,000 of Benja’s total 2019 income. However, Chapin admitted today that Benja had no contracts with the national sportswear companies and that he fabricated the spreadsheet. Chapin further admitted that for reference calls from the venture capital firm, he paid a Benja employee to impersonate a national running shoe company’s representative and instructed another individual to impersonate a national sportswear company’s representative. The venture capital firm relied on these representations and invested $1,000,000 in Benja. Chapin used that money to pay off a creditor.
Chapin also admitted defrauding individual investors. For example, in his plea agreement Chapin stated that in November 2018 he emailed false financial statements to an individual investor reflecting Benja had over $4,000,000 in revenue in 2018. Chapin further told the individual investor that a St. Louis, Missouri, venture capital firm was considering a $1,500,000 investment in Benja, although Chapin already knew the firm had declined to invest in Benja. Chapin also had a person impersonate the St. Louis venture capital firm’s manager during a reference call with the individual investor. In the call, the impersonator told the individual investor that a third party had verified Benja’s financials and had also made customer reference calls about Benja that were positive. Chapin admitted he then provided false contact information for the St. Louis venture capital firm’s manager that allowed Chapin – not the venture capital firm’s manager – to respond to the individual investor’s questions about Chapin’s shareholder agreement. The individual investor signed the shareholder’s agreement, purchasing 1,278 shares of common stock in Benja for $100,000. Chapin admits he used that money to pay personal credit card bills and to transfer the funds to his personal bank and cryptocurrency exchange accounts.
Chapin agreed in his plea agreement that from June 2019 through September 2020, the total loss amount attributable to his fraud scheme exceeded $3,500,000.
Chapin was originally charged by federal complaint on November 23, 2020, and later by information on May 27, 2021. He pleaded guilty today before United States District Judge Maxine M. Chesney 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. He remains out of custody on bond.
Chapin’s sentencing hearing is scheduled for October 6, 2021, before United States District Judge Maxine M. Chesney in San Francisco. For bank fraud under 18 U.S.C. § 1344, Chapin faces a maximum sentence of 30 years imprisonment and a fine of $1,000,000. For wire fraud under 18 U.S.C. § 1343, he faces a maximum sentence of 20 years imprisonment and a fine of $250,000. For securities fraud under 15 U.S.C. § 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5, he faces a maximum sentence of 20 years imprisonment and a fine of $5,000,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
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.
Source: DOJ Release