Startup Litigation Digest #6
UC Center for Business Law San Francisco | June 2025
About this Edition
Welcome to our sixth edition of the Startup Litigation Digest.
In this newsletter, we focus on identifying and highlighting key litigation matters that impact founders, investors, board members, and legal advisors in private companies. We hope this newsletter shines a light on the evolving legal and regulatory issues that shape the tech and venture ecosystem.
We also welcome your input to help guide future editions. If you have comments on this issue or are aware of litigation developments that may be worth featuring in upcoming digests, feel free to contact us directly or email us at epsteinevan@uclawsf.edu or cablea@uclawsf.edu
Sincerely,
UC Center for Business Law San Francisco
Summary of Cases
U.S. v Joanna Smith‑Griffin. On November 19, 2024, Joanna Smith‑Griffin, founder and CEO of AllHere Education, an AI ed-tech startup spun out of Harvard, was arrested in North Carolina and indicted on charges of securities fraud, wire fraud, and aggravated identity theft in connection with an alleged scheme to defraud investors out of millions of dollars.
SEC v David Kushner and La Mancha Funding Corp. On November 21, 2024, the Securities and Exchange Commission charged David Kushner, a resident of Boca Raton, Florida, and his company La Mancha Funding Corp. with defrauding nearly two dozen investors out of approximately $2.1 million in a series of private securities offerings. Kushner is La Mancha’s president and sole owner.
U.S. v Alexander Beckman and Valerie Lau Beckman. On January 23, 2023, Alexander Beckman, the founder and former CEO of GameOn, Inc. also known as GameOn Technology or ON Platform (“GameOn”), and his wife, Valerie Lau Beckman, a licensed attorney and GC of a VC firm involved in GameOn matters, were arrested and indicted by the DOJ with conspiracy, wire fraud, securities fraud, identity theft, among other offenses. In parallel, the SEC charged Alexander Beckman with defrauding investors out of more than $60 million by falsely inflating the financial performance and commercial success of Game on. The SEC also charged Valerie Lau Beckman with fraud.
CaaStle: Alleged Financial Fraud and Governance Failures. On March 29, 2025, CaaStle’s board disclosed that founder and former CEO Christine Hunsicker had allegedly provided falsified financial statements and fabricated audit reports to investors, inflating revenue and cash balances as part of a scheme to raise over $500 million. Civil lawsuits have been filed, and DOJ and SEC investigations are ongoing.
Cookies: Founders Prevail in Dispute with Investors Over Major Cannabis Operation. On February 19, 2025, an arbitrator awarded Cookies Creative Consulting & Promotions Inc., controlled by founder Berner, approximately $18 million in damages against Cookies Retail LLC, following a dispute over licensing fees, revenue sharing, and joint venture agreements related to Cookies’ cannabis retail operations.
Updates on Cases from Prior Issues
FTX Litigation Update (Issue #1): On March 7, 2025, Sam Bankman-Fried appeared in a Tucker Carlson interview from the Metropolitan Detention Center in Brooklyn (see below). The interview, reportedly part of his push for a pardon from Trump, led to SBF being placed in solitary confinement, according to the New York Times. A Bureau of Prisons spokesperson stated that “this particular interview was not approved.”
Ozy Media & Carlos Watson (Issue #1):
On Dec 16, 2024, Carlos Watson, the founder and former CEO of Ozy Media, Inc. (Ozy), was sentenced by Judge Eric R. Komitee of the U.S. District Court for the Eastern District of New York to 116 months in prison for conspiracy to commit securities fraud, conspiracy to commit wire fraud and aggravated identity theft.
On March 28, 2025, Watson was granted an executive grant of clemency by President Trump with “an immediate commutation of his entire sentence to time served with no further fines, restitution, probation, or other conditions.”
Bitwise, Jake Soberal & Irma Olguin Jr. (Issue #1):
On December 17, 2024, Jake Soberal, 38, and Irma Olguin, Jr., 44, the founders and leaders of the failed Fresno-based start-up company, Bitwise Industries (“Bitwise”), were sentenced to 11 years and 9 years in prison, respectively, for defrauding people out of approximately $115 million.
On March 12, 2025, A federal bankruptcy judge approved the terms of a $20 million settlement that will benefit former Bitwise employees who abruptly lost their jobs when the company collapsed in May 2023.
Bolt & Ryan Breslow (Issue #1):
March 2025: Bolt did not complete a controversial $14 billion fundraise from last year (and that we wrote about in our last issue). But Breslow was reinstated as CEO, ending a long boardroom power struggle and SEC scrutiny.
Ryan addressed the controversy surrounding a $30 million personal loan he secured from Bolt, which led to a lawsuit by investor Activant. The dispute was ultimately settled, with Bolt repurchasing Activant’s shares for $37 million last year. He defended the loan and unveiled plans for a “super app.”
Frank, Charlie Javice, and Olivier Amar (Issue #1):
On March 28, 2025, Charlie Javice, former founder and CEO of Frank, and Olivier Amar, the company’s former Chief Growth and Acquisition Officer, were found guilty of defrauding JPMorgan out of $175 million.
The bank has a separate civil lawsuit pending as it seeks to recover part of the amount paid for Frank.
SoftBank v. IRL (SoftBank Vision Fund v. Abraham Shafi & others) (Issue #2)
The lawsuit in a federal court located in California that we covered in Issue 2, SoftBank v. IRL, in which SoftBank sued former IRL CEO Abraham Shafi and five relatives for allegedly misleading the investor about the messaging app’s growth, was dismissed.
However, parallel litigation is proceeding in Delaware, where Shafi and co-founder Genrikh Khachatryan filed derivative and direct claims against venture investors Goodwater Capital, SoftBank, Floodgate Fund, their board designees, and Scott Kauffman, the replacement CEO. The founders allege that the VC-backed directors disloyally seized control of Get Together Inc. (GTI), replaced Shafi, shut down operations, and exercised their liquidation preferences to claim the company’s $40 million cash reserve, leaving common shareholders with nothing. Vice Chancellor Lori Will allowed most claims to move forward, finding sufficient allegations that the VC-affiliated directors may have prioritized their own interests over the company’s. The litigation could have broader implications for Delaware law on dual fiduciary conflicts in venture-backed companies.
1. U.S. v Joanna Smith‑Griffin
On November 19, 2024, federal prosecutors in the Southern District of New York unsealed an indictment charging Joanna Smith-Griffin, founder and former CEO of AllHere Education (“AllHere”), an AI ed-tech startup spun out of Harvard, with securities fraud, wire fraud, and aggravated identity theft.
According to the indictment, from at least in or about November 2020 through at least in or about June 2024, Smith-Griffin engaged in a scheme to defraud investors in AllHere, an educational technology startup she founded at Harvard that sold artificial intelligence software designed to increase classroom attendance and engagement in K-12 school districts. Beginning as early as AllHere’s Series A financing round in November 2020 and continuing through the collapse of the company in June 2024, Smith-Griffin allegedly misrepresented AllHere’s revenue, customer base, and cash to her investors.
For example, in the spring of 2021, Smith-Griffin allegedly told potential AllHere investors that AllHere had generated approximately $3.7 million in revenue in 2020, had approximately $2.5 million in cash on hand, and had major school district customers like the New York City Department of Education ("NYC DOE") and Atlanta Public Schools. In fact, according to the indictment, AllHere had generated approximately $11,000 in revenue in 2020, had approximately $494,000 in cash, and did not have contracts with many of the customers it represented, including the NYC DOE and Atlanta Public Schools.
Smith-Griffin’s misrepresentations allegedly continued through AllHere’s collapse, during which time she was able to obtain nearly $10 million from investors and sought an additional $35 million from a private equity investor who ultimately decided not to invest. She allegedly used some of the fraudulently obtained funds to put a down payment on her house in North Carolina and pay for her wedding. Smith-Griffin allegedly also embezzled corporate funds for her own benefit.
AllHere is now in Chapter 7 bankruptcy, its employees have been laid off, and AllHere is under the control of a court-appointed bankruptcy trustee.
2. SEC v David Kushner and La Mancha Funding Corp
On November 21, 2024, the SEC charged David Kushner, president and sole owner of La Mancha Funding Corp., with securities fraud in connection with an alleged $2.1 million fraud involving nearly two dozen investors.
According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, Kushner and La Mancha raised approximately $10.5 million through a series of LLC offerings marketed as vehicles to invest in short-term loans to sports agents and professional athletes, including current and former NFL players. The SEC alleges that Kushner misled investors about the use of funds, diverting hundreds of thousands of dollars in undisclosed fees and misappropriating nearly $1.5 million in loan repayments that were contractually owed to investors. The complaint further alleges that Kushner used the misappropriated funds for personal expenses, including credit card payments, tuition, country club dues, luxury vacations, a Mercedes-Benz, and a rental home in the Hamptons.
The SEC charged Kushner and La Mancha with violations of the Securities Act, Exchange Act, and Investment Advisers Act. The complaint seeks injunctive relief, disgorgement, civil penalties, and a director-and-officer bar against Kushner. Parallel criminal charges were filed by the New York County District Attorney’s Office.
3. U.S. v. Alexander Beckman and Valerie Lau Beckman
On January 23, 2025, federal prosecutors indicted Alexander Beckman, founder and former CEO of San Francisco-based AI chatbot startup GameOn, Inc. (also known as GameOn Technology or ON Platform), and his wife, Valerie Lau Beckman, a licensed attorney and general counsel at a venture firm involved in GameOn matters. Both were charged with conspiracy, wire fraud, securities fraud, identity theft, and related offenses. In parallel, the SEC filed civil charges against both defendants, alleging investor fraud exceeding $60 million.
Founded in 2014, GameOn raised approximately $80 million from investors, including Equiam, B3 Capital, Commonwealth Financial Network, and Mirae Asset Venture Investment. According to the indictment, from 2020 through 2024, Beckman allegedly fabricated GameOn’s financial performance by inflating revenue, cash balances, and customer contracts. Prosecutors allege he created fake audit reports, forged bank statements, and used stolen identities of multiple individuals to mislead investors and board members. Investor funds were allegedly diverted for personal use, including private school tuition, luxury vehicles, jewelry, country club memberships, personal property taxes, and a $4.2 million San Francisco residence.
The indictment further alleges that Valerie Lau Beckman actively assisted in the scheme by reviewing and distributing fraudulent financial documents to investors, helping plant falsified bank records for board review, and later attempting to delete evidence as regulatory scrutiny intensified. She is also accused of fabricating board minutes authorizing personal loans used to repay misappropriated funds.
Following Alexander Beckman’s resignation under board pressure in July 2024, GameOn’s board discovered significant financial discrepancies, including bank accounts with near-zero balances despite prior representations of multi-million dollar reserves. The company subsequently paused operations and executed mass layoffs.
4. CaaStle: Alleged Financial Fraud and Governance Failures
In March 2025, the board of CaaStle, a NYC-based subscription fashion startup formerly known as Gwynnie Bee, alerted shareholders that the company was facing severe financial misconduct allegations tied to its founder and former CEO, Christine Hunsicker. Backed by over $530 million from investors including Bill Ackman, Henry Kravis, and others, CaaStle had raised significant capital while reporting substantial revenue growth and liquidity. The board disclosure revealed a drastically different reality, describing falsified financial statements, fabricated audit reports, and misstated capitalization figures.
According to board communications obtained by Axios, Hunsicker allegedly provided investors with inflated revenue figures, claiming $519 million in 2023 revenue, when audited results showed actual revenue of only $15.7 million. Similarly, cash balances that had been presented as “hundreds of millions” were, in reality, under $1 million by late 2023. The financial discrepancies extended back multiple years, with prior-year revenues also significantly overstated.
The alleged fraud came to light after Jed Lenzner, a financial advisor to Henry Kravis, raised concerns upon discovering that BDO, the firm presented as CaaStle’s auditor, had actually disengaged years earlier. This triggered a board investigation, which ultimately uncovered widespread financial misrepresentations. Despite uncovering the misconduct, questions remain as to why board members, including high-profile directors such as Ram Shriram and Alphabet Chairman John Hennessy, did not act sooner or disclose the findings to shareholders earlier.
Following Hunsicker’s resignation as CEO and board member, CaaStle furloughed employees and appointed longtime COO George Goldenberg as interim CEO. The board also brought in Monica Blacker of Force 10 Partners as an independent director to assist in restructuring efforts. In parallel, the company explored emergency bridge financing while signaling that law enforcement agencies were conducting investigations. A Chapter 11 bankruptcy filing remains a possibility as CaaStle attempts to stabilize its operations.
Multiple civil lawsuits have already been filed. P180, a spinout inventory monetization firm co-founded by Hunsicker, sued CaaStle for fraud, alleging it was misled into financing major acquisitions based on falsified financial data. Christine Hunsicker stepped down as Chair of P180. Separately, EXP Topco, owner of the Express trademarks, sued CaaStle and Hunsicker for breaching licensing and settlement agreements tied to their business relationship. Regulatory investigations by the DOJ and SEC are reportedly ongoing, but no federal enforcement complaints have been publicly filed as of yet.
The CaaStle saga highlights serious governance failures, including board-level conflicts, lack of transparency, and potential breaches of fiduciary duty. Despite uncovering financial misconduct, directors allegedly remained silent, leaving investors uninformed for months.
The company is facing potential DOJ and SEC enforcement actions, along with civil litigation. A possible Chapter 11 bankruptcy filing may eventually bring clarity to the extent of the fraud and financial mismanagement, but it will also likely delay investor recovery efforts and complicate accountability for those involved.
5. Cookies: Founders Prevail in Dispute with Investors Over Major Cannabis Operation
In early 2025, Cookies, the high-profile cannabis brand co-founded by rapper Berner (Gilbert Milam Jr.) and Jai “Jigga” Chang, became the center of a major dispute between the company’s founders and its investors. The conflict arose between Cookies Creative Consulting & Promotions Inc. (the IP holding company controlled by Berner) and Cookies Retail LLC, the joint venture formed to operate Cookies-branded dispensaries with backing from investors including Privateer Holdings, Gron Ventures (Brandon Johnson), 1212 Ventures (Douglas Rosenberg), and Ned Fussell.
The investors accused Berner and Cookies Creative of diverting revenue, entering undisclosed side licensing agreements, and improperly shifting profits from the jointly operated retail business to the founder-controlled IP entity. Cookies Creative denied wrongdoing and countered that the investors themselves had breached agreements and withheld payments owed to the IP company.
The dispute proceeded to arbitration in San Francisco before retired Judge David Garcia. In February 2025, Garcia ruled in favor of Cookies Creative and Berner, finding that Cookies Retail LLC had breached contractual obligations and owed approximately $17.9 million in damages to Cookies Creative. The arbitration award remains subject to court confirmation.
The Cookies case underscores the governance and control challenges that can arise in complex licensing and joint venture structures, particularly in consumer brands operating within heavily regulated industries such as cannabis.
About the UC Center for Business Law San Francisco
The UC Center for Business Law San Francisco was founded in 2018 with the mission of bringing together leading scholars, business leaders, practitioners, regulators and students to engage in the study, teaching and practice of business law at UC Law SF (formerly UC Hastings).
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