The Securities and Exchange Commission has charged Abraham Shafi, the founder and former CEO of the social media startup IRL, with orchestrating a $170 million fraud. Investors were purportedly deceived about the company's user growth and Shafi's personal use of company funds. As reported by the Securities and Exchange Commission, IRL was presented as a rapidly expanding platform with 12 million users. Still, these figures were inflated by paid advertisements and undisclosed marketing strategies.
Shafi, based in Pepeekeo, Hawaii, allegedly funneled millions in advertising expenses to give the illusion of organic growth, misguiding investors with falsified documents. According to the SEC's allegations, he and his fiancée, Barbara Woortmann, also used company credit cards for personal luxuries such as clothing and travel, accumulating hundreds of thousands of dollars in misappropriated funds. The SEC seeks various penalties against Shafi, including permanent injunction, monetary fines, and disgorgement, as well as an officer-and-director bar. Woortmann has been named a relief defendant for her role in the personal expenses funded by investor capital.
The platform itself, once valued at $1.17 billion, has come to an abrupt end. The IRL website announced its shutdown on June 27th, expressing gratitude towards its users and redirecting them to other platforms for their community interactions. Despite Shafi's previous claims of having sufficient funds to sustain the company into 2024, as mentioned in a memo obtained by TechCrunch, the company is now ceasing operations and returning capital to shareholders.
Further tarnishing the startup's image, findings revealed that 95% of IRL's 20 million reported users were not actual people but bots or automated accounts, as uncovered by the company's board and first reported by TechCrunch. The investigation resulted in Shafi being suspended and an interim CEO stepping in. Despite efforts to contact Shafi and other employees after the emails were disabled, TechCrunch could not reach them for comment. As IRL's narrative comes to a close, former employees and investors are left grappling with the fallout of a social media venture that strayed far from reality.
