A cofounder of frequent flyer miles tracking site UsingMiles reportedly has been charged with bilking investors out of some $450,000 and putting the money to personal use.
Austin Veith, who left the company in January and had served as CEO, was arrested in New York, and faces five felony counts for securities fraud and theft in Boulder County, Colo., reports the Daily Camera.
Veith allegedly diverted funds from UsingMiles' investors, including current CEO Jon Nordmark, who headed eBags for a decade, and Brett Jackson, who is managing director at BRJ Investments.
UsingMiles, based in Greenwood Village, Colo., was featured in a TLabs Showcase in November.
Krista Paul, Using Miles cofounder and vice president of marketing, says "we have known about this for a long time and are way past this." The alleged fraud may not have been limited to UsingMiles, Paul adds.
"This has no impact on our business and is old news to us," Paul says. "Austin is no long affiliated with the company as an employee, an officer or a shareholder and it's been this way for a least six months."
Paul says UsingMiles received venture funding in a round led by iSherpa Capital "subsequent to Mr. Veith's behavior and has been focused on hiring top executives and building out a great team."
"In fact, we just launched a new website last week and were named one of Entrepreneur Magazine's 'Top 100 Brilliant Companies,'" Paul adds.
UsingMiles will continue to cooperate with law enforcement authorities in the Veith matter "and hopes that they can help innocent people find justice," Paul says.
With investor money seemingly flowing freely into innumerable startups in recent years, the Veith incident, if he is convicted, will be a wakeup call.