CaaStle’s CollaapSe: How a $300 Million Fraud Left Workers Unpaid, and the WARN Act Plaintiffs Who Are Fighting Back

When fashion-tech company CaaStle, Inc. shut its doors in the spring of 2025, it didn’t give its workers the advance written notice the WARN Act requires, and it didn’t pay its people what the law says they were owed. That failure is now the subject of a CaaStle WARN Act lawsuit. CaaStle furloughed hundreds of employees across four states, New York, California, Ohio, and Arizona, then permanently terminated them without the notice period federal and state law requires. Prosecutors say the company’s founder and CEO was busy stealing nearly $300 million from investors at the same time. Court filings tell an even stranger side of the story. While ordinary workers got nothing, a handful of company insiders allegedly cashed out millions in stock by threatening to expose the fraud themselves. CaaStle paid them off in exchange for their silence.

CaaStle’s story is a case study in what happens when corporate greed collides with the people who actually keep a business running. It is also, we believe, a case study in accountability inlcuing, a criminal conviction and prison sentence for Christin Hunsicker, the executive at the center of both the company’s apparent success and its ignominious downfall, an active Chapter 7 Trustee working to claw back money for the banktupcy estate, and a pending class action lawsuit fighting to make sure laid-off workers are not the last ones paid, or forgotten.

A Fashion-Tech “Unicorn” Built on Falsified Numbers

CaaStle’s roots go back to 2011, when it launched as Gwynnie Bee, a direct-to-consumer clothing rental subscription service. By 2018, it had pivoted into a B2B platform, powering rental and subscription programs for recognizable retail brands including Ann Taylor, Express, and Vince. To the outside world, it looked like a legitimate, growing fashion-tech company, and for years it presented itself to investors as a runaway success story. According to the federal indictment brought by the U.S. Attorney’s Office for the Southern District of New York and a parallel civil complaint from the Securities and Exchange Commission, that success was largely fiction.

Founder and CEO Christine Hunsicker pleaded guilty to falsifying CaaStle’s financial statements, audit documents, and bank records for years, beginning no later than 2019. Court filings describe staggering gaps between what investors were told and what was actually happening inside the company:

• CaaStle reported an operating profit of nearly $24 million for the second quarter of 2023. Its actual operating profit was less than $30,000.
• CaaStle told investors its 2021 revenue was more than $100 million higher than the real number.
• CaaStle claimed $230 million in net revenue for 2022. Actual net revenue didn’t exceed $20 million.

CaaStle never turned a profit in any year from 2019 through 2024, and its revenue declined every year during that stretch, even as Hunsicker kept soliciting new investors with doctored financials. By the time the company filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on June 20, 2025 (Case No. 25-11187 (BLS)), it was, in the Trustee’s words, insolvent and had been for years.

How the Fraud Unraveled

The fraud did not unravel overnight. According to reporting on the case, an audit firm confronted Hunsicker in October 2023 after discovering a falsified audit document she had given to an investor, an episode she reportedly dismissed as a mix-up from a university lecture. It took over a year longer for the truth to surface further: in late 2024, an advisor to a CaaStle investor contacted the company’s outside auditor directly and learned the firm had actually dropped the account years earlier. That discovery reached CaaStle’s board, which confronted Hunsicker in January 2025, and she admitted the fraud.

Board member John Hennessey, a former president of Stanford University, resigned in the aftermath. CaaStle did not formally notify investors of the fraud or of the resulting DOJ and SEC investigations until March 29, 2025, one day after CaaStle furloughed its workforce. (See coverage from The Race to the Bottom and TechCrunch.)

Hunsicker resigned from CaaStle’s board in December 2024 and as CEO in March 2025. She was indicted in July 2025 and pleaded guilty on March 4, 2026 to securities fraud. On August 20, 2026, U.S. District Judge J. Paul Oetken sentenced her to five years in federal prison, three years of supervised release, and ordered her to pay $283,291,940 in forfeiture and restitution. U.S. Attorney Jamie McDonald put it plainly: Hunsicker “stole $300 million from unwitting investors.”

You can read the Department of Justice’s full press release on the sentencing here: Founder of Fashion-Tech Company CaaStle Sentenced To Five Years In Prison For $300 Million Fraud (U.S. Attorney’s Office, SDNY).

The Human Cost: Furloughed, Then Terminated, Without Proper Notice

The headlines about investor losses and prison sentences ignore a simple compelling story: the workers who showed up, did their jobs, and got nothing in return when the company collapsed.

CaaStle “furloughed” employees on or about March 28, 2025, a”a move that CaaStle confirmed, weeks later, as a mass layoff and plant closing on or about April 25, 2025. Hundreds of employees lost their jobs at CaaStle facilities in four states. None of them, according to court filings, received the advance written notice the law requires before a mass layoff.

These are not abstract numbers. They are graphic designers, product designers, and everyday employees who lost their paychecks and their health insurance without the notice period the law requires, while the company’s founder was allegedly forging board signatures and fabricating bank records to keep the fraud running just a little longer. Workers went without the legally required notice from a founder who had spent years covering up the truth. That is exactly the gap the CaaStle WARN Act lawsuit is now trying to close.

Some former employees have said they were not entirely surprised the company was struggling financially, even if no one anticipated fraud on this scale. One former CaaStle employee told TechCrunch that leadership rarely shared details about the company’s financial health, and that staff used to joke, “we probably don’t make any money.” Asked about the fraud allegations specifically, the employee said, “I don’t think anyone expected it.” That gap, between what leadership knew and what the people doing the work were told, is exactly what advance notice laws like the WARN Act are meant to close.

The WARN Act and the CaaStle WARN Act Lawsuit

The federal Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. § 2101 et seq., requires employers with 100 or more employees to give workers 60 days’ advance written notice before a mass layoff or plant closing. The idea is simple: workers deserve time to plan, find new jobs, and adjust their finances before their income disappears, not to be told after the fact. You can review the U.S. Department of Labor’s overview of the law here: WARN Act Compliance Assistance, U.S. Department of Labor.

New York goes further. The New York WARN Act (NYLL § 860 et seq.) requires 90 days’ advance notice for covered employers, a longer runway than federal law provides, and California’s WARN Act (Cal. Lab. Code § 1400 et seq.) imposes similar notice requirements, plus civil penalties for violations. More detail on New York’s version of the law is available from the New York State Department of Labor: Worker Adjustment and Retraining Notification (WARN), NYS DOL.

When an employer skips notice and simply shuts down, the remedy under the WARN Acts is back pay and benefits, typically up to 60 days’ worth, for every affected employee.

That is the basis of the pending CaaStle WARN Act lawsuit, filed in CaaStle’s bankruptcy case on behalf of plaintiffs and other former CaaStle employees, asserting claims under the federal WARN Act, the New York WARN Act, and the California WARN Act. The Marlborough Law Firm, together with co-counsel Cross & Simon, LLC and Orin Kurtz, Esq., represents the proposed class in that adversary proceeding pending in the U.S. Bankruptcy Court for the District of Delaware. The complaint alleges CaaStle terminated hundreds of employees without the notice federal and state law require, and seeks up to 60 days of unpaid wages and benefits for the class.

Employee Rights in Bankruptcy: Why Workers Are Priority Creditors

One of the most important, and least understood, protections for laid-off workers is that employee wage claims get priority treatment in bankruptcy. When a company like CaaStle liquidates under Chapter 7, there often isn’t enough money to pay everyone the company owes, and the Bankruptcy Code decides who collects first.

11 U.S.C. § 507(a)(4) gives priority to unpaid wages, salaries, and commissions earned within 180 days before the bankruptcy filing, up to a statutory cap per employee, ahead of most general unsecured creditors. Section 507(a)(5) gives similar priority to certain unpaid contributions to employee benefit plans. And where WARN Act damages accrue after the bankruptcy petition is filed, the claims can qualify for an even higher rung: first-priority administrative expense status under 11 U.S.C. § 503(b)(1)(A). You can review the priority scheme directly at 11 U.S.C. § 507, Cornell Law School Legal Information Institute.

Congress decided that a bank, a landlord, or a vendor shouldn’t come ahead of the people who worked for a failed company. Workers’ claims jump ahead of most other unsecured debt. That priority status is a central piece of the CaaStle WARN Act lawsuit, which is exactly why it matters so much whether the estate actually has assets to distribute.

The Trustee’s Work: Marshalling Assets for the Estate

Recovering money for creditors, including laid-off workers, depends on the Chapter 7 Trustee’s ability to find and recover assets that should never have left the company in the first place.

George L. Miller, the Chapter 7 Trustee appointed to administer CaaStle’s bankruptcy estate, has been doing exactly that. On August 12, 2026, the Trustee filed an adversary complaint against South Main Holdings LLC, Cava Capital LLC, Cava Capital SPV XVI-A LLC, and individuals J. Robert Geiman, Kevin M. Lynch, and Geoff Schneider, seeking to recover $9,250,000 in stock redemption payments CaaStle made in 2024, while the company was, according to the complaint, already insolvent.

The Insider Payoff Scheme

This is where the payoff scheme mentioned earlier comes back into the picture. According to the Trustee’s complaint, CaaStle offered only about 15 of its more than 900 shareholders, including several company insiders, the chance to cash out their shares before the company collapsed, while the “vast majority” of shareholders got nothing. The complaint alleges some of those shareholders were able to redeem their stock only after threatening to expose Hunsicker’s fraud. As a condition of getting paid, CaaStle then required those shareholders to sign confidentiality and non-disparagement agreements.

In other words, the same fraud that wiped out hundreds of jobs allegedly bought a handful of insiders a payday and their silence. The Trustee is seeking to avoid and recover those transfers as fraudulent under the Bankruptcy Code and state law, on the theory that CaaStle quietly paid insiders out of a sinking ship while ordinary workers and investors got nothing.

This kind of asset-recovery litigation is unglamorous but critical. Every dollar the Trustee claws back from insiders who cashed out early becomes a dollar available to pay legitimate creditor claims, including the priority wage claims at the center of the CaaStle WARN Act lawsuit. The Trustee’s pursuit of these insider payments is a meaningful step toward making sure the people actually harmed by CaaStle’s collapse have a real shot at recovery, not just a judgment on paper.

Accountability on Every Front

The CaaStle saga shows accountability moving on several fronts at once. There was a criminal prosecution that put the person responsible for the fraud behind bars and ordered nearly $300 million in restitution and forfeiture. There is a bankruptcy trustee working to recover millions of dollars in insider payouts for the estate. And there is the CaaStle WARN Act lawsuit fighting to make sure the workers who lost their jobs without proper notice and no severance get the priority payment the law promises them.

Corporate fraud hurts more than investors on a balance sheet. It hurts the employees who show up every day, often the last to know their company is failing and the first to lose their income when it does. The WARN Act exists to give workers a voice, and a check, when employers try to walk away without one.

Frequently Asked Questions

What is the WARN Act?

The WARN Act, formally the Worker Adjustment and Retraining Notification Act, is a federal law requiring employers with 100 or more employees to give at least 60 days’ written notice before a mass layoff or plant closing. Several states, including New York and California, have their own WARN Acts that add longer notice periods and additional requirements on top of federal law.

Do employees collect wages before other creditors when a company goes bankrupt?

In most cases, yes. Unpaid wages earned within 180 days of a bankruptcy filing, up to a statutory cap, get priority treatment under 11 U.S.C. § 507(a)(4), ahead of most general unsecured creditors. Certain unpaid benefit plan contributions get similar priority under Section 507(a)(5), and WARN Act damages that accrue after a bankruptcy filing can qualify for first-priority administrative expense status under 11 U.S.C. § 503(b)(1)(A).

What can I do if my employer didn’t give WARN Act notice before a layoff?

If your employer failed to give the legally required advance notice before a mass layoff or plant closing, you may be able to recover up to 60 days of wages and benefits under the WARN Act, and potentially more under your state’s law. An employment attorney can help determine whether the layoff is covered by the WARN Act.

Who is representing former CaaStle employees in the WARN Act lawsuit?

The Marlborough Law Firm, P.C., together with co-counsel Cross & Simon, LLC and Orin Kurtz, Esq., represents former CaaStle employees in the CaaStle WARN Act lawsuit, the pending adversary proceeding in CaaStle’s Chapter 7 bankruptcy case.

Contact a WARN Act Lawyer If You Were Laid Off in a mass layoff or plant closing like the workers in the Caastle case

If you believe your employer conducted a mass layoff or plant closing without the notice required by federal or state law, you may have rights to recover unpaid wages and benefits, and those claims may carry priority status in a bankruptcy proceeding. The Marlborough Law Firm represents workers in WARN Act and wage theft claims. Contact us to discuss your situation and learn what options may be available to you.

This post is for general informational purposes only and does not constitute legal advice. Court filings referenced above are matters of public record in In re CaaStle, Inc., Case No. 25-11187 (BLS) and related adversary proceedings pending in the U.S. Bankruptcy Court for the District of Delaware. Allegations in pending litigation are allegations only, unless and until proven.