Former Slync CEO Chris Kirchner was charged with fraud Tuesday after the Securities and Exchange Commission and the U.S. Department of Justice filed criminal complaints alleging he lied to investors and misappropriated over $28 million from the FreightTech company he helped launch in 2017 to fund his lavish lifestyle.
Kirchner, 35, of Westlake, Texas, was arrested at his home early Tuesday after FBI agents raided the home. He made an initial appearance before U.S. Magistrate Judge Hal R. Ray Jr. in the U.S. District Court for the Northern District of Texas later in the day.
According to the SEC complaint, from January 2020 through May 2021, Kirchner raised approximately $67 million from two rounds of capital fundraising, including the $60 million Series B funding round that closed in February 2021 and was led by venture firms Goldman Sachs Growth, ACME Ventures, 235 Capital Partners, Correlation Ventures and other existing investors.
“We allege that Kirchner lied about Slync’s business to secure tens of millions of dollars from investors, a massive portion of which he then stole from the company to live extravagantly while not paying Slync’s employees,” said Sheldon L. Pollock, associate director of the SEC’s New York Regional Office, in a statement.
Soon after the company received the $60 million fund raise in 2021, court filings in a wrongful termination lawsuit by a former Slync vice president claim Kirchner bought a 2010 Gulfstream G550 jet for around $15 million.
Kirchner’s personal investment entity, KFIM LLC, is also named in the complaint. Investigators claim he formed the entity in November 2020 “primarily to purchase a private jet for his personal use and to hold certain assets that [Kirchner] misappropriated from investors in the Series B raise.” The Delaware-based company lists Kirchner as owning 51%, and his wife, Alyssa Beth Kirchner, as owning 49% of KFIM. His wife has not been charged.
In January, the jet was sold for an undisclosed amount.
“While we don’t know the price the jet sold for, this was likely a very good investment for Kirchner, as the price of private jets has appreciated a great deal since he first acquired the plane,” said Craig Fuller, CEO of FLYING Magazine and FreightWaves.
Of the $67 million of investor funds raised by Slync, the SEC claims in court filings that Kirchner “misappropriated more than $28 million” prior to his termination in August 2022.
At the time, Slync, a logistics visibility platform that works with shippers, 3PLs and carriers, was valued at $240 million.
However, SEC investigators claim in court documents that Kirchner’s deception ranged from “grossly inflating Slync’s revenue figures to intentionally misrepresenting the number and nature of Slync’s customer contracts, to falsely claiming that investor proceeds would be used to fund product development and to support the company’s growth.”
In the complaint, the SEC states that Kirchner “siphoned investor proceeds by diverting funds to his personal bank accounts … including for the purchase of a private jet, payment of personal credit cards and funding of [Kirchner’s] personal investment accounts.”
The complaint charges Kirchner with violating antifraud provisions of federal securities laws, and it seeks permanent injunctive relief, disgorgement with prejudgment interest, civil penalties, and an officer and director bar against Kirchner.
Prior to his firing in August 2022, Kirchner’s lavish spending had come under fire after he failed to pay employees for months but continued to use his private jet to fly to celebrity golf tournaments and attempted to buy an English soccer team.
After Kirchner’s firing, investors, led by Goldman Sachs, which has a seat on Slync’s board of directors, agreed to inject more funding to pay Slync’s employees.
Slync says it is cooperating with investigations
Since August, Greg Kefer, chief marketing officer of Slync, said the company has been “focused on delivering next-generation technology to the global logistics industry.”
Kefer confirmed Tuesday that the company is aware of the fraud charges filed against Kirchner by the SEC and DOJ.
“Slync is cooperating with the government in its investigations and, as a victim of Christopher Kirchner’s actions, looks forward to a just resolution of this matter,” Kefer said in a statement to FreightWaves.
In October, John Urban, who served as a strategic adviser to Slync for nearly four years, was tapped to lead the embattled supply chain platform. He also co-founded and grew GT Nexus into one of the world’s largest cloud-based software-as-a-service providers.
In a parallel action, the DOJ also filed criminal charges against Kirchner, alleging he “wired $20 million from Slync’s bank account to his personal checking account.”
If convicted, Kirchner faces up to 20 years in federal prison.
“As the criminal complaint alleges, Mr. Kirchner used his position as a CEO to defraud investors and the company he worked for by diverting funds for his personal benefit. He did this to fund a lavish lifestyle at the expense of those that trusted him to act responsibly and ethically,” said James J. Dwyer, FBI Dallas acting special agent in charge.
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Watch FW NOW episode after Chris Kirchner was ousted as Slync’s CEO and board chairman