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The US Securities and Exchange Commission (SEC) has filed charges against Abraham Shafi, the founder and former CEO of the social network IRL, for misleading investors.
According to the SEC, Shafi provided false and misleading data about the company's growth and concealed the fact that he and his fiancee, Barbara Wurtman, used corporate credit cards for personal needs.
IRL, which is positioned as a viral social network application, has rapidly gained popularity during the pandemic. However, a serious problem was revealed: most of the users turned out to be fake. In June 2023, after an internal investigation, the company's board of directors found out that 95% of the app's users were bots. Before IRL's collapse, Shafi managed to raise $170 million in venture capital, and the startup reached an estimated value of $1.17 billion.
The SEC alleges that Shafi presented IRL as an organically evolving platform with 12 million users. In reality, the company spent millions of dollars on advertising with an offer to download the app. Shafi concealed these expenses by providing documents that significantly underestimated marketing expenses, and redirecting payments to the advertising platform through third parties.
The facts of Shafi and Wurtman's personal spending on clothing, furniture and travel at the expense of corporate funds were also hidden.The SEC alleges that Shafi took advantage of the high demand for investments in technology companies prior to their IPO, misleading investors about IRL's business practices.
• Source: https://www.sec.gov/newsroom/press-releases/2024-92
According to the SEC, Shafi provided false and misleading data about the company's growth and concealed the fact that he and his fiancee, Barbara Wurtman, used corporate credit cards for personal needs.
IRL, which is positioned as a viral social network application, has rapidly gained popularity during the pandemic. However, a serious problem was revealed: most of the users turned out to be fake. In June 2023, after an internal investigation, the company's board of directors found out that 95% of the app's users were bots. Before IRL's collapse, Shafi managed to raise $170 million in venture capital, and the startup reached an estimated value of $1.17 billion.
The SEC alleges that Shafi presented IRL as an organically evolving platform with 12 million users. In reality, the company spent millions of dollars on advertising with an offer to download the app. Shafi concealed these expenses by providing documents that significantly underestimated marketing expenses, and redirecting payments to the advertising platform through third parties.
The facts of Shafi and Wurtman's personal spending on clothing, furniture and travel at the expense of corporate funds were also hidden.The SEC alleges that Shafi took advantage of the high demand for investments in technology companies prior to their IPO, misleading investors about IRL's business practices.
• Source: https://www.sec.gov/newsroom/press-releases/2024-92
