Green finance startup backed by celebrities like Leonardo DiCaprio now facing probe over suspicious deals

Just three years after seeking a $2 billion IPO, a green finance startup backed by celebrities is falling apart as it faces investigations by U.S. authorities.

The company, Aspiration Partners, was one of the first climate-oriented companies going into public markets that focused on consumer finance rather than clean renewable energy.

Touting itself as “Wall Street greed’s worst nightmare,” it offered investment funds that excluded oil companies and promised customers it would plant a tree every time they swiped their credit card. Customers just needed $500 to invest in their first mutual fund with them, and they used a tipping model instead of charging customers fixed fees.

Among those who supported the company in the last decade are actors Leonardo DiCaprio, Robert Downey, Jr. and Orlando Bloom, along with rapper Drake and supermodel Cindy Crawford. Drake even promoted Aspiration Partners, whose tagline “Clean rich is the new filthy rich” could be found on billboards in major U.S. cities.

These celebrities would have enjoyed a nice payday if the company had gone public. Instead, it is facing scrutiny by the Securities and Exchange Commission and the Department of Justice, both of which are now looking into its activities.

Within a year of signing its first deals with corporate clients, the business’s new unit made up more than half of the $100 million it reported in revenue for 2021. However, it turns out that a big part of this came from questionable deals that inflated their revenue.

Bloomberg Green launched an investigation of its own, interviewing corporate customers of Aspiration and dozens of employees and reviewing internal documents. As it sought a public listing, Aspiration claimed it had deals in place with dozens of business customers, but it was not forthcoming about who they were.

However, a disproportionate number of customers were Colombian celebrities, some of whom told Bloomberg Green that they signed agreements with another entity run by Aspiration’s co-founder to cover the costs they promised to Aspiration. One actor involved said that the situation “sounded very weird” and said “I smelled something I didn’t like.”

Accountants found questionable payments and auditors quit

In 2022, the company’s accountants found numerous payments that worried them, including more than $3 million that came from an entity that had been registered to their co-founder. This prompted concerns that someone at the company was carrying out fake transactions in order to inflate their number.

Harvard Business School Assistant Professor of Accounting and Management Jung Koo Kang, a former auditor, told Bloomberg Green: “If that’s the case, that would be a clear violation of the law.”

It didn’t help their reputation when their auditor, KPMG, quit without signing off on their 2021 financial reports.
Adam Pritchard, a University of Michigan professor specializing in securities law, said: “Auditors are required to withdraw if they don’t trust the numbers being presented by the client. When you see the auditors quit, that’s a big red flag for investors.”

Aspiration is now insolvent and is being pursued by Eden Reforestation Projects, a former tree planting partner, for millions of dollars in expenses. They have laid off most of their employees, whose numbers once exceeded 400, and are facing at least six lawsuits over unpaid bills from vendors.

Sources for this article include:

ClimateDepot.com

Bloomberg.com