"According to the Department of Justice, Abraham Shafi, 38, who lives in Hawaii, allegedly told venture capital investors the growth of his event-based social media app, IRL, was "organic" from people inviting their friends to download it. Shafi claimed the company only spent $50,000 a month on marketing and PR to acquire new users, court records show. In reality, IRL spent about $200,000 per month on advertisements to help inflate the number of users and hid that data from potential investors, authorities claim."
"Authorities allege investors specifically asked Shafi during the Series C process about "user acquisition channels" on the platform. Shafi claimed that IRL was different from other social media apps. "This is a free organic channel (users are not incentivize or paid for these invites, and must invite each friend individually with no bulk invites)," an email written by Shafi to an investor excerpted in the indictment states. "Unlike other apps that spend aggressively to acquire new users, we spend very little.""
Federal authorities charged Abraham Shafi with obstruction of justice, securities fraud, and wire fraud after alleging he misled investors about IRL's user growth and ad spending. Shafi allegedly told investors growth was "organic" and that the company spent about $50,000 monthly on marketing, while IRL actually spent roughly $200,000 per month on paid advertisements. IRL raised $170 million in a Series C led by SoftBank Vision Fund 2 and reached a $1.17 billion valuation. Authorities also allege Shafi deleted relevant records by restoring his phone to a previous backup and invoiced ad expenses through a third party to conceal spending.
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