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Authorities within the US have charged the founding father of the previous social media firm, IRL, with a $170m (£133m) fraud.
The Securities and Exchange Commission (SEC) accuses Abraham Shafi of defrauding traders by making deceptive statements in regards to the firm’s progress.
IRL – which was as soon as thought of a possible rival to Facebook – took its identify from its intention to get its on-line customers to satisfy up in actual life.
However, the preliminary optimism evaporated after it emerged most of IRL’s customers have been bots, with the platform shutting in 2023.
As effectively as accusing Mr Shafi of defrauding traders, the SEC additionally says he hid his and his fiancée’s intensive use of firm bank cards to pay for private bills.
It is alleged he and Barbara Woortmann spent a whole bunch of hundreds of {dollars} on private bills, together with clothes, residence enhancements and journey.
Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, mentioned: “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 says it believes Mr Shafi raised about $170m by portraying IRL as the brand new success story within the social media world.
It alleges he informed traders that IRL had attracted the overwhelming majority its supposed 12 million customers by way of natural progress.
In actuality, it argues, IRL was spending tens of millions of {dollars} on ads which provided incentives to potential customers to obtain the IRL app.
That expenditure, it’s alleged, was subsequently hidden within the firm’s books.
Mr Shafi has not responded to the cost, however in a publish on LinkedIn a yr in the past, amid widespread experiences that as many as 95% of IRL’s prospects have been truly bots, he defended his function within the firm.
The SEC’s criticism was filed within the US district court docket for the northern district of California.
Among different penalties, it seeks a ban towards Mr Shafi from holding directorship of corporations.
