The founder and former CEO of a startup social media platform has been accused of misleading investors and defrauding them to the tune of $170 million.
The Securities and Exchange Commission said Wednesday that it has charged Abraham Shafi who it says gained investment based on false and misleading claims about the growth of Get Together Inc., a privately held social media startup known as “IRL”.
It is alleged that investors were told that the social media app had achieved 12 million users organically, failing to disclose that many had been incentivized financially to download it or that millions of dollars had been spent marketing the incentives. Third parties were used to hide the extent of marketing from investors, the SEC said.
The SEC also alleges that Shafi and his fiancée, Barbara Woortmann, used the company’s credit cards for their own personal expenses including clothes, 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.”
The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, charges Shafi with violating the antifraud provisions of the federal securities laws and seeks permanent injunctive relief, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Shafi.
Woortman is named as a relief defendant with the SEC seeking disgorgement with interest in relation to the alleged spending on company credit cards, which was ultimately paid using investors’ money.
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
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