An Orange County entrepreneur and investor known for his crusade to end poverty in California has agreed to plead guilty to carrying out a $248 million dollar scheme to defraud investors and lenders to the Los Angeles-based startup he co-founded, the U.S. Attorney’s Office announced on Thursday, Aug. 21.
Joseph Neal Sanberg, once the public face of a high-flying, environmentally conscious digital bank with star-studded backing and a sky-high $2 billion valuation, is now facing a likely lengthy prison sentence after prosecutors say he has reached a plea deal admitting to two felony counts of wire fraud.
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Locally, Sanberg, 46, was best known for his long-running anti-poverty efforts. During a 2016 interview with a Southern California News Group reporter, Sanberg referred to economic disparity as “the most severe moral crisis we face as a nation.”
Sanberg grew up in Villa Park and attended Servite High School, later describing the all-male Catholic school – which accepted students of all faiths — as being the place where his values were shaped. He moved on from Orange County to Harvard to Wall Street, where he built a fortune from early investments in companies like Blue Apron.
Sanberg later said he ultimately found Wall Street exciting but hollow. Instead, he described turning his attention to startup companies with a social purpose and to his social reform projects.
Those projects included a failed 2024 ballot measure that would have raised California’s minimum wage and a push for a California version of the federal Earned Income Tax Credit. Sanberg bankrolled a statewide publicity campaign that used free tax preparation clinics, community events, social media and ethnic news outlets to get the word out about the inaugural use of the tax credit to those who lived in needy and often overlooked neighborhoods.
Sanberg grew up knowing about financial uncertainty first-hand, with his single mother having struggled to raise two boys on what she earned as a substitute teacher and a freelance book editor, and at one point losing a childhood home to foreclosure. He later told a reporter, “I understand how economic turmoil can make you feel less than human.”
Sanberg considered running for the Democratic presidential nomination in 2019 — on an anti-poverty platform — but ultimately decided against it.
The Orange County Register at one time recognized Sanberg as one of the county’s most influential people, citing his founding of Aspiration, a financial firm that allowed users to set the fee they’d pay; his work on the board of Casa Teresa, an Orange-based nonprofit that provided support to pregnant women; and his founding of an international leadership program at Servite.
Sanberg co-founded Aspiration with Andrei Cherny, a former political speechwriter and Navy intelligence officer. At one point Sanberg reportedly owned 35% of Aspiration and claimed to have invested more than $100 million into the company.
As Aspiration sought to go public in 2021, the high-profile startup drew nearly $600 million in backing from a group of celebrity backers that included Steve Ballmer, Leonardo DiCaprio, Robert Downey Jr. and Cindy Crawford, and claimed five million users.
According to a profile in Forbes, Aspiration offered IRAs invested in fossil-fuel-free companies, a debit card with cash back from “conscience coalition” companies and carbon offsets for gas purchases. The company’s motto was “clean rich is the new filthy rich.”
Then, according to news reports, the company’s growth slowed, a rift grew between Sanberg and Cherny — who was fired by the board — and the firm abruptly pivoted to selling carbon credits.
Sanberg’s surprise arrest came amidst allegations that he defrauded lenders in connection with a pair of multi-million personal loans taken out against his shares and that some of Aspiration’s reported revenue was based solely on letters of intent from investors.
Federal law enforcement officials now say that Sanberg built Aspiration “on a lie to boost the company’s value and line his own pockets” and “used his position at Aspiration to deceive investors and lenders for his own benefit.”
“This so-called ‘anti-poverty’ activist has admitted to being nothing more than a self-serving fraudster, by seeking to enrich himself by defrauding lenders and investors out of hundreds of millions of dollars,” Acting United States Attorney Bill Essayli said in a statement. “I commend our law enforcement partners for their efforts in this case, and I urge the investing public to use caution and beware of wolves in sheep’s clothing.”
Marc Mukasey, Sanberg’s defense attorney, said in a brief statement on Thursday, “Joe Sanberg accepts responsibility and looks forward to bringing this matter to a swift and just resolution.”
Prosecutors say that between 2020 and 2021, Sanberg and Ibrahim AlHusseini — another member of Aspiration’s board of directors and a co-defendant in the criminal case — fraudulently obtained $145 million in loans by pledging shares of Sanberg’s Aspiration stock.
In order to secure the loans, prosecutors allege the two men falsified AlHusseini’s bank and brokerage statements in order to inflate AlHusseini’s assets by tens of millions of dollars.
Sanberg personally recruited companies and individuals to commit — through letters of intent — to pay tens of thousands of dollars per month for tree planting services, according to court filings.
But prosecutors say Sanberg — using legal entities under his control — concealed that the actual payments for the tree planting services came from Sanberg himself rather than customers.
As a result, prosecutors added, Aspiration’s financial statements were inaccurate, reflecting much higher revenue than the company had actually received.
Prosecutors also allege that Sanberg concealed Aspiration’s true financial position by fabricating a letter from the company’s audit committee falsely stating they had $250 million in available cash and assets.
At the time, prosecutors say, Aspiration had less than $1 million in available cash.
Using those fake financial materials, prosecutors say, Sanberg was able to obtain millions of dollars in additional loans and investments in Aspiration securities.
Officials with the U.S. Attorney’s Office say Sanberg is expected to formally enter the guilty plea within the coming weeks.
AlHusseini, the co-defendant — reached a plea agreement earlier this year and is scheduled to be sentenced on Sept. 29.