The SEC has now charged a CEO with a huge $170 million fraud scheme that lied to investors about how fast the business was growing.
The SEC said in a statement that Abraham Shafi, who started and used to be the CEO of the private social media startup “IRL” (Get Together Inc.), cheated investors out of money.
The SEC’s complaint says that Shafi, who lives in Pepeekeo, Hawaii, got about $170 million from investors by lying about IRL as a social media platform that was quickly growing and got most of its 12 million users from people who found it on their own.
In fact, the SEC says that IRL spent millions of dollars on ads that made people want to download the app, but Shafi hid these marketing costs from investors.
The SEC also says Shafi didn’t tell investors that he and his fiancée, Barbara Woortmann, used IRL’s business credit cards to pay for hundreds of thousands of dollars in personal costs, like travel, clothes, and furniture for their home.
The SEC says Shafi lied to investors who gave IRL $170 million by saying things that were not true about the company’s growth and hiding the fact that he used company money for personal things.
The head of the SEC’s San Francisco office, Monique C. Winkler, said, “As we said, Shafi took advantage of investors’ desire to put money into pre-IPO technology companies and fraudulently raised about $170 million by lying about IRL’s business practices.”
“People who invest in this area should stay alert.”
The SEC filed a complaint in the U.S. District Court for the Northern District of California accusing Shafi of breaking the federal securities laws against fraud. The SEC is also asking for permanent injunctive relief, civil money penalties, disgorgement with prejudgment interest, and a ban on Shafi’s ability to serve as an officer or director.
According to the report, Woortmann is also named as a relief defendant in the lawsuit. It asks for disgorgement and prejudgment interest for the personal costs she put on an IRL credit card that was paid for with investor money.