The fintech industry has seen its fair share of spectacular failures and bizarre plot twists in recent years. Now, one of the stranger tales has gotten even weirder.

California fintech Aspiration Partners started life in 2013 as an environmentally conscious digital bank. It raised nearly $600 million from a star-studded roster of investors including Leonardo DiCaprio, Drake, Robert Downey Jr. and billionaire Steve Ballmer. And it briefly won a $2.3 billion valuation in a 2021 deal to go public via a SPAC. After fintech valuations crashed and the SPAC deal and Aspirations’s core banking business softened, it rebooted to focus on another leg of its business—the sale of carbon credits.

Then last week, Joseph Sanberg, Aspiration’s cofounder and largest shareholder, was arrested on a federal criminal complaint alleging he conspired to defraud lenders in connection with two personal loans he took out against his shares–one in 2020 for $55 million and a replacement loan (based on the same shares) for $145 million in 2021. Sanberg defaulted on the second loan, causing the lender to lose the whole $145 million, the government alleges.

Sanberg, a 45-year-old Orange, California resident, is free on a $200,000 bond and scheduled to be arraigned late this month. Neither he nor his lawyer replied to our requests for comment. Meanwhile, his alleged co-conspirator, former Aspiration board member Ibrahim Ameen Alhusseini, 51, has pleaded guilty to wire fraud in a cooperation deal with the U.S. Attorney for the Central District of California. He is scheduled to be sentenced on September 29th, presumably after giving evidence against Sanberg, which could reduce his sentence.

Alhusseini told Forbes in a 2023 interview that he previously made money as a serial entrepreneur and investing in fiber optics. He also said he had invested $50 million into Aspiration.

The latest turn in the Aspiration story is particularly striking given the startup’s initial, carefully cultivated do-gooder image. In 2013, Sanberg co-founded Aspiration with Andrei Cherny, a tech entrepreneur with a non-tech background. The two founders first met at a student event at Harvard decades before. Cherny—who ran unsuccessfully in a Democratic primary for an Arizona congressional seat last year—previously worked as a speechwriter for Vice President Al Gore, an intelligence officer in the U.S. Navy, and in other legal and public policy positions.

Sanberg also stood out for his focus on public service. He has promoted himself as the son of a single mom who grew up poor in California. He got into Harvard and landed on Wall Street, becoming a founding investor in the meal service Blue Apron. Leaving Wall Street for the startup world, he embraced social reform projects and called himself an anti-poverty advocate. He has publicly criticized the United States wages, tax system and legacies of social inequality. Sanberg owned 35% of Aspiration and told Forbes two years ago that he invested over $100 million into the company.

In 2021, when Aspiration had $255 million in funding, a $1 billion valuation and five million claimed users, it earned a spot as a newcomer on the Forbes’ annual Fintech 50 list. Besides offering IRAs invested in fossil-fuel-free companies, it touted a debit card with cash back from select “conscience coalition” companies, carbon offsets for gas purchases and a membership option that let customers pay what they wanted–or nothing at all.

Later that year, Aspiration announced plans to go public through a special acquisition company merger that valued it at $2.3 billion. A prominent company motto—painted on billboards in major cities across America—read “clean rich is the new filthy rich.”

But in October 2022, after the startup’s growth had slowed, Sanberg and Aspiration’s board abruptly fired Cherny. A rift had grown between the founders. The firm then pivoted to focus on selling carbon credits, a puzzling, dramatic shift that Forbes chronicled two years ago. The startup's future seemed uncertain during this jarring turn of events.

Last year, Bloomberg reported on inexplicable payments to Aspiration from anonymous firms, some with ties to Sanberg, and how some of Aspiration's reported revenue was based solely on letters of intent from investors, with no money being exchanged. At the time, Cherny, Aspiration’s cofounder, told Bloomberg he was unaware of any such issues. Citing people close to the matter, Bloomberg also reported that the Justice Department and Commodity Futures Trading Commission had opened an investigation related to its carbon credits business.

Today, the startup has rebranded its corporate carbon credits business into Catona Climate and spun off Aspiration into a consumer financial brand.

The new criminal case doesn’t appear—at least so far—to involve either Catona’s or Aspiration’s operations. Still, Sanberg’s arrest and AlHusseini’s guilty plea the same day cast the two Aspiration leaders in an unflattering light. The alleged conspiracy is detailed in federal court filings in the Central District of California—the criminal complaint filed to support Sanberg’s arrest and AlHusseini’s plea agreement filed with the court in February, AlHusseini, was first arrested last October, newly unsealed documents show.

To get the loans, Sanberg pledged 10.3 million shares in Aspiration Partners. But because the lenders could not readily re-sell those shares, AlHusseini accepted the obligation to buy them as options to be exercised in the case of a default, using forged documents to claim he had the resources to do so. Sanberg negotiated each loan knowing that AlHusseini did not have the money to back up the put option, the complaint alleges.

For each negotiation, the pair devised methods to deceive the lenders, the complaint alleges. They created fake financial statements and a mock Fidelity brokerage account with the help of a Lebanese graphic designer who “falsely inflated” AlHusseini’s net worth. For example, in early 2020, according to AlHusseini’s guilty plea, AlHusseini sent a falsified brokerage account statement that claimed he owned more than $86 million worth of securities when the actual sum was $4,390.10. A phony bank account statement claimed he had $25 million in cash when it was really just $43,267.74. In November 2021, to back the larger loan, he sent a fake brokerage account document saying he owned $199 million in securities. The account actually held just $2,693.63. By that point, in 2021, AlHusseini was offering to pay $65 million in the event of Sanberg’s default on the $145 million loan. According to the government, AlHusseini was paid $12.3 million for his participation in the scheme.

AlHusseini sent falsified statements on at least 24 occasions between April 2020 and February 2023, according to his guilty plea. Sanberg advised him on how to avoid suspicion throughout the loan negotiations, according to the district court complaint against him.

Eventually, Sanberg defaulted on the loan twice—first in November of 2022 and then in the spring of 2023. After Sanberg’s default, AlHusseini never purchased the shares, leading to the lender losing the funds entirely, the complaint alleges.

The charges in the complaint against Sanberg and in AlHusseini’s plea deal theoretically carry a maximum 20 year penalty, though sentencing in federal fraud cases is based on the defendant’s prior record, the amount of the loss, and such factors as whether they accept responsibility or have provided substantial assistance to the government in the case.