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 false information about the company’s growth.
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, misused company credit cards for personal expenses such as clothing, home improvements, and travel, totaling hundreds of thousands of dollars.
Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, stated, “Shafi took advantage of investors’ interest in pre-IPO technology investments and fraudulently raised approximately $170m by providing false information about IRL’s business practices. Investors in this sector should remain cautious.”
The SEC alleges that Shafi raised funds by portraying IRL as a successful social media platform, claiming that the majority of its 12 million users were acquired organically. However, it is alleged that the company actually spent millions on advertisements to attract users, which was not disclosed in its financial records.
Despite the charges, Shafi has not responded publicly. 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 companies. This case serves as a reminder for investors to be vigilant and conduct thorough due diligence before investing in the tech sector.
