On Monday, the Securities and Exchange Commission (SEC) filed a civil complaint against Benja Incorporated, a fledgling e-commerce business, and its founder and CEO for deceiving investors. The Northern District of California filing alleges that defendant Andrew J. Chapin, 31, falsely claimed that Benja had generated millions in revenue through contracts with companies like Nike, Inc., Patagonia, Inc., and Fanatics, Inc. in order to entice investors.
The complaint explains that from at least June 2018 through September 2020, San Francisco-based Benja held itself out to be an e-commerce company that placed “online advertisements for major clothing brands, enabling those brands to sell excess merchandise at a discount.” The SEC’s complaint describes a series of solicitations Chapin undertook to raise money for Benja starting in 2018.
First, a San Francisco investor reportedly sunk $100,000 into Benja, after Chapin fraudulently claimed that Nike had spent $275,000 with Benja, Patagonia had spent $161,500, and Backcountry.com had spent $170,000. As part of his due diligence, the San Francisco investor allegedly “wanted assurances that another sophisticated investor had vetted Benja as an investment.” In turn, Chapin arranged a call with the founder and general partner of a St. Louis capital investment firm. Chapin introduced the founder and general partner by name, though the St. Louis investor later disclaimed ever taking part in such a call or investing in Benja.
In 2020, the complaint avers, Chapin made further deceptive claims and handed over falsified financial records and customer contracts to a New York investor who contributed $1 million to Benja. The money, the complaint says, was immediately used to pay back a creditor to whom Benja owed several million dollars. Benja also owed money to a financing company that, in July, demanded repayment of its $4.5 million loan after learning that Benja’s purported outstanding receivables, embodied in another falsified document, did not exist.
Finally, Chapin solicited three other investments using surreptitious means, one from the original San Francisco investor, another from a second San Francisco investor, and a third from a New York-based accelerator. The accelerator reportedly invested after Chapin made representations that Benja had contracted with Spotify and TikTok, when in fact, it had not. In October, Benja filed for Chapter 11 bankruptcy protection.
The complaint contends that Chapin’s conduct was both knowing and reckless. The SEC seeks disgorgement of Chapin’s ill-gotten gains, the assessment of civil penalties, and an order enjoining Chapin from taking an officer or director role in a company with SEC-registered securities.
In a press release the director of the SEC’s San Francisco Regional Office, Erin E. Schneider, remarked that “[w]e allege that Chapin violated the federal securities laws by deceiving investors about the most fundamental aspects of Benja’s business by falsely portraying it as a successful e-commerce technology company that in a short period of time had generated significant revenue from several high-profile clients. We will continue to pursue companies and executives who mislead investors.” The SEC also thanked the U.S. Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation for their investigatory assistance.
