Abraham Shafi, the former CEO of social media company Get Together, also known as “IRL”, has been indicted on charges of wire fraud, securities fraud, and obstruction of justice in connection with an alleged scheme to defraud investors of $170 million.
Why it matters: The case highlights the potential for fraud and deception in the high-stakes world of tech startups and venture capital, and serves as a warning to investors and regulators alike.
The details:
- Shafi allegedly lied to investors about IRL’s advertising expenses and user acquisition strategies during the company’s Series C funding round in 2021, claiming that the company spent “very little” on paid advertising.
- In reality, Shafi had channeled millions into incentive advertising, an expenditure he went to great lengths to hide by instructing employees to falsify invoices and repackage ad spending as infrastructure costs.
- The alleged fraud continued even during an SEC investigation, with Shafi allegedly deleting records from his cell phone and directing others at IRL to fabricate their testimonies.
The stakes: If convicted, Shafi faces up to 20 years in prison for each charge.
What they’re saying:
- “This indictment serves as a warning to tech companies and startups that deceptive practices aimed at misleading investors will be met with serious legal consequences,” said a spokesperson for the prosecuting agency.
- “Unlike other apps that spend aggressively to acquire new users, we spend very little,” Shafi allegedly told investors during the Series C funding round.
The background: IRL had swiftly risen to popularity by promising a new way for people to connect and plan events, with its rapid growth and high valuation initially seen as indicators of its potential. However, the company shuttered in June 2023.
What’s next: The case is under active investigation by the FBI, with the prosecution being led by the U.S. Attorney’s Office for the Northern District of California and the Criminal Division’s Fraud Section.