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While venture capitalist and the rest period of the technorati are off on vacation or attending the Paris Olympics , the U.S. Securities and Exchange Commission and its staff attorneys are keeping busy this summer .
Forthe second timethis workweek — and at least the fourth metre in the past several months — the SEC has charged a speculation - backed laminitis on allegation of fraud .
The SEC said Wednesday it has lodge Abraham Shafi , the founder and former CEO of the social media inauguration known as IRL , for allegedly defrauding investor . The agency says Shafi made false and misleading statement about the ship’s company ’s growth and hide that he and his fiancée , Barbara Woortmann , extensively used company acknowledgment card to make up for personal expenses .
IRL was position as a viral social medium app that take off during the pandemic , but there was one lowly problem : Its millions of user were fake . IRL , which get down as a social calendar app and was building out a messaging - base social connection to become the “ WeChat of the West , exclude down in June 2023after an internal probe by the company ’s circuit board found that 95 % of the app ’s users were “ automated or from bot . ”
Before IRL ’s demise , Shafi had managed to raise $ 200 million in venture capital . The startup ’s last round — aSeries C raise of $ 170 millionled by Softbank ’s Vision Fund 2 — drive IRL into unicorn status with a $ 1.17 billion valuation . Problems and concerns egress not long after .
The SEC sound out in its complaint Wednesday that Shafi depict IRL as a viral social media platform that had organically attracted its purpose 12 million users . Instead , IRL spend millions of dollars on ad that offered incentives to download the IRL app , according to the SEC .
The SEC alleges Shafi then hid those expenses . The complaint also alleges that Shafi did n’t let out to investors that he and Woortmann charged hundreds of K of dollars on the company ’s credit cards on clothing , home furnishings and travel .
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“ As we aver , Shafi accept advantage of investors ’ appetency for investments in the pre - IPO technology space and fraudulently raised around $ 170 million by lie about IRL ’s business practices , ” aver Monique C. Winkler , Director of the SEC ’s San Francisco Regional Office . “ Investors in this space should carry on to be vigilant . ”
to begin with this week , the SEC chargedBitClout father Nader Al - Najiwith fraud and unregistered offer of securities , claiming he used his pseudonymous online identity “ DiamondHands ” to avoid regulatory examination while he arouse over $ 257 million in cryptocurrency . BitClout , a buzzy crypto startup , was second by eminent - profile VCs such as a16z , Sequoia , Chamath Palihapitiya ’s Social Capital , Coinbase Ventures and Winklevoss Capital .
In June , the SEC charge Ilit Raz , CEO and founder of the now - shutter AI enlisting startup Joonko , with defraud investors of at least $ 21 million . The agency aver Raz made false and misleading statements about the quantity and quality of Joonko ’s customers , the routine of candidates on its platform and the startup ’s revenue .
The government agency has also gone after speculation firms in recent months . In May , the SEC level Robert Scott Murray and his unwavering Trillium Capital LLC with a fraudulent scheme to manipulate the line terms of Getty Images Holdings Inc. by announce a phoney offer by Trillium to buy Getty Images .
