Last week, 38-year-old Jeremy Blackburn, co-founder and former chief operating officer of Canopy Financial, was found dead in a truck in a “barn-like structure” owned by his family members in Illinois’ Lee County, according to an account in the Chicago Tribune. Blackburn was to begin serving a 15-year prison sentence the next day.
The death isn’t being investigated as a homicide, according to Lee County sheriff John Varga.
It’s a sad chapter in the surprising story of a once-promising company turned cautionary tale. Indeed, in May 2009, Vikram Kashyap, co-founder and CEO of Canopy, whose technology helped streamline the administration of Health Savings Accounts, was named Ernst & Young Entrepreneur of the Year. Six months later, the company — which raised more than $88 million in venture funding — was very publicly imploding. The antecedent: the revelation that Canopy’s tax statements, customer records, and financial results were falsified, and that its biggest round of funding — $62.5 million in the summer of 2009 from Spectrum Equity Investors and Foundation Capital – had been raised on a pack of lies.
The company quickly fell apart at the seams, and by March of 2010, two former executives of the now-bankrupt company were charged with double-dealing investors out of $75 million, as well as illegally pocketing roughly $20 million from accounts of customers who were using the service to pay their medical bills. Blackburn was charged in a criminal complaint as was Canopy’s chief technology officer, Anthony Banas.
Both pleaded guilty in late 2010 to one count of wire fraud, admitting they’d engaged in a fraud scheme and misappropriated millions of dollars from their customers.
Then last month, in little noticed news, Banas and Blackburn were sentenced to 15 years and 13 years in prison, respectively, and ordered to pay mandatory restitution and forfeiture totaling $93,125,918. (According to the FB I, approximately $50 million has been recovered so far through Canopy’s bankruptcy proceedings, and the government anticipates that the bankruptcy trustee will pay the claims of the health savings account customers.)
The judge also noted at the sentencing of Banas, 34, and Blackburn that the case was the most aggravated financial fraud he had seen in his 18 years on the federal bench.
According to court documents, Blackburn alone took approximately $6 million in unauthorized withdrawals and transfers from Canopy bank accounts during 2009. Says an FBI report: “Blackburn typically directed a Canopy employee, or occasionally Banas, to transfer Canopy funds to his bank accounts or to pay for his personal expenses, including credit card balances, luxury car purchases, and funding his account with a private jet company. Among Blackburn’s luxury car purchases with Canopy funds were the following: two 2010 Range Rover SUVs, a 2009 Bentley, a 2008 Lamborghini, a 2010 Lamborghini, a 2009 Rolls Royce Phantom, a 2009 Aston Martin DBS, a 2009 Bentley Continental, and a 2009 Ferrari 430. Blackburn also paid for personal home renovations, bought sports tickets and purchased jewelry and watches using misappropriated Canopy funds.”
Banas, says the FBI report, “used misappropriated Canopy money to invest $300,000 in a nightclub. Banas also spent $400,000 between 2007 and 2009 on other personal expenses.”
Blackburn was to begin his sentence on March 20. Banas heads to prison next month.
Kashyap – who claimed through his attorney that he “had no prior knowledge whatsoever of any fraud regarding Canopy’s financial statements” was never charged and has all but disappeared in the years since revelations of fraud at the company emerged.
The one-time venture capitalist – Kashyap joined the West Coast office of Battery Ventures after graduating from Harvard, but left the firm to form Canopy – lists himself on AngelList, along with two startups he has apparently backed (Earth Class Mail and BlackDrumm).
However, he hasn’t updated his LinkedIn profile since 2009, when he is most recently listed as the CEO and founder of Canopy. Meanwhile, a Google search for Vikram Kashyap turns up mostly links to a Cleveland-area doctor of the same name.