The founder of the former social media company IRL, Abraham Shafi, is facing serious charges of fraud in the US. The Securities and Exchange Commission (SEC) has accused Shafi of deceiving investors by providing misleading information about the company’s growth, ultimately defrauding them of $170 million.
IRL, once seen as a potential rival to Facebook, aimed to bring online users together in real life. However, the company’s downfall began when it was revealed that the majority of its users were actually bots, leading to its closure in 2023.
In addition to the fraud allegations, the SEC claims that Shafi and his fiancée, Barbara Woortmann, used company credit cards for personal expenses totaling hundreds of thousands of dollars, including clothing, home improvements, and travel.
Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, stated, “As we alleged, Shafi took advantage of investors’ appetite for investments in the pre-IPO technology space and fraudulently raised approximately $170m by lying about IRL’s business practices. Investors in this space should continue to be vigilant.”
The SEC alleges that Shafi misrepresented IRL as a successful social media platform, claiming organic user growth when in reality, the company was spending millions on advertisements to attract users. These expenses were allegedly concealed in the company’s financial records.
While Shafi has not responded to the charges, in a previous LinkedIn post, he defended his actions within the company. The SEC’s complaint has been filed in the US district court for the northern district of California, seeking penalties including a ban on Shafi holding directorship positions in the future.
This case serves as a reminder for investors to be cautious and thoroughly research potential investments in the technology sector.
