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Founder behind social media app IRL charged with fraud


While venture capitalists and the rest of the technorati are off on holiday or attending the Paris Olympics, the U.S. Securities and Exchange Commission and its staff attorneys are keeping busy this summer. 

For the second time this week — and at least the fourth time in the past several months — the SEC has charged a venture-backed founder on allegations of fraud. 

The SEC said Wednesday it has charged Abraham Shafi, the founder and former CEO of the social media startup known as IRL, for allegedly defrauding investors. The agency says Shafi made false and misleading statements about the company’s growth and concealed that he and his fiancée, Barbara Woortmann, extensively used company credit cards to pay for personal expenses.

IRL was positioned as a viral social media app that took off during the pandemic, but there was one small problem: Its millions of users were fake. IRL, which started as a social calendar app and was building out a messaging-based social network to become the “WeChat of the West, shut down in June 2023 after an internal investigation by the company’s board found that 95% of the app’s users were “automated or from bots.” 

Before IRL’s demise, Shafi had managed to raise $200 million in venture capital. The startup’s last round — a Series C raise of $170 million led by Softbank’s Vision Fund 2 — pushed IRL into unicorn status with a $1.17 billion valuation. Problems and concerns emerged not long after. 

The SEC said in its complaint Wednesday that Shafi portrayed IRL as a viral social media platform that had organically attracted its purported 12 million users. Instead, IRL spent millions of dollars on ads that offered incentives to download the IRL app, according to the SEC.

The SEC alleges Shafi then hid those expenses. The complaint also alleges that Shafi didn’t disclose to investors that he and Woortmann charged hundreds of thousands of dollars on the company’s credit cards on clothing, home furnishings and travel.

“As we alleged, Shafi took advantage of investors’ appetite for investments in the pre-IPO technology space and fraudulently raised approximately $170 million by lying about IRL’s business practices,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office. “Investors in this space should continue to be vigilant.”

Earlier this week, the SEC charged BitClout founder Nader Al-Naji with fraud and unregistered offering of securities, claiming he used his pseudonymous online identity “DiamondHands” to avoid regulatory scrutiny while he raised over $257 million in cryptocurrency. BitClout, a buzzy crypto startup, was backed by high-profile VCs such as a16z, Sequoia, Chamath Palihapitiya’s Social Capital, Coinbase Ventures and Winklevoss Capital. 

In June, the SEC charged Ilit Raz, CEO and founder of the now-shuttered AI recruitment startup Joonko, with defrauding investors of at least $21 million. The agency alleged Raz made false and misleading statements about the quantity and quality of Joonko’s customers, the number of candidates on its platform and the startup’s revenue.

The agency has also gone after venture firms in recent months. In May, the SEC charged Robert Scott Murray and his firm Trillium Capital LLC with a fraudulent scheme to manipulate the stock price of Getty Images Holdings Inc. by announcing a phony offer by Trillium to purchase Getty Images. 



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