The founder and CEO of digital advertising startup Benja has been charged with defrauding investors and a lender by falsely representing that well-known brands including Nike and Patagonia were using its services.

According to the U.S. Securities and Exchange Commission, Andrew Chapin, 31, went as far as forging contracts with purported customers and impersonating customers in calls with at least one investor to maintain the “illusion of Benja’s commercial success” and raise $1.75 million in capital between October 2018 and September 2020.

Chapin falsely claimed to investors including two venture capital firms that “Benja was profitable and had generated millions of dollars in revenue from customers that supposedly included Nike, Patagonia and Fanatics,” the SEC said in a civil complaint.

In a parallel criminal case, federal agents arrested Chapin on Monday on allegations that he fraudulently induced a bank to provide Benja with a line of credit that grew from $1 million to $5 million and was secured by accounts receivable.

“We cannot allow tech financing to become a lemon’s market,” David L. Anderson, U.S. Attorney for the Northern District of California, said in a news release. “Silicon Valley needs capital, and investors need facts not fiction.”

Benja, which Chapin founded in 2017, claimed to help well-known companies sell overstock inventory by placing ads on websites that allow a shopper to purchase products in the ad itself without being redirected to another website.

A slide deck presented to one investor in June 2018 described Benja as a “group of scrappy hustlers” and claimed that up to that point, Nike had spent $275,000 with the company, Patagonia had spent $161,500 , and Backcountry.com had spent $170,000.

“In reality, Benja did not have contracts with, or revenue from, the major brands it claimed were its customers,” the SEC alleged.

Chapin allegedly represented to one of the venture capital investors that he would use its money to develop Benja’s technology or purchase advertising when, in fact, he used it to repay some of the credit line. Benja filed for bankruptcy last month.

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