In internet lingo, the abbreviation IRL means “in real life.”
But for the now defunct social media platform IRL, reality and the picture the company painted for its investors were allegedly two very different things.
That’s according to charges filed this week by the Securities and Exchange Commission (SEC) against Abraham Shafi, IRL’s founder and former CEO.
The SEC alleges that Shafi defrauded investors by making false and misleading statements about the platform’s growth, and by concealing extensive company credit card spending by him and his fiancée for personal expenses.
“As we alleged, Shafi took advantage of investors’ appetite for investments in the pre-IPO technology space and fraudulently raised approximately $170 million by lying about IRL’s business practices,” Monique C. Winkler, director of the SEC’s San Francisco Regional Office, said in a Wednesday (July 31) press release. “Investors in this space should continue to be vigilant.”
Shafi could not be reached for comment.
According to the SEC, Hawaii resident Shaft raised about $170 million from investors by portraying IRL as a viral social media platform that organically attracted the large majority of its purported 12 million users.
But the SEC says there was nothing organic about this growth, as the company had spent millions on ads that offered users incentives to download its app.
“Shafi hid those expenditures by offering documents that significantly understated the company’s marketing expenses and by routing advertising platform payments through third parties,” the SEC said.
The commission further alleges that Shafi had kept from investors that he and fiancée, Barbara Woortmann — named as a relief defendant — charged hundreds of thousands of dollars to IRL’s business credit cards for things like clothing, travel and home furnishings.
Founded at the height of COVID, IRL was initially pitched as a social calendar designed to help people bond over shared experiences and meet up in real life.
“Colleges and universities, in particular, need a way to build and foster a sense of community, whether their students are away from campus remote learning or on campus practicing hybrid learning,” Shafi said in 2020 after the company’s $16 million Series B.
“This new funding will allow us to … help students create lasting memories and friendships through shared experiences, and look toward international markets.”
That $16 billion was followed by a $170 million Series C round that valued IRL at $1.17 billion, according to a TechCrunch report. That same report notes that the company shut down last year after an internal investigation found that 95% of its 20 million users were either automated or from bots.
The post SEC: Founder of Social Platform IRL Defrauded Investors appeared first on PYMNTS.com.
