SEC charges unicorn founder with $170M fraud

The Securities and Exchange Commission charged the founder of a pandemic-born unicorn social media network "IRL" with defrauding investors of $170 million. 

Abraham Shafi, age 37, founder and former CEO of Get Together Inc., the privately held parent company of IRL, misled investors by portraying IRL as a viral social platform that organically attracted the majority of its purported 12 million users, the SEC claims. 

The complaint states that IRL spent millions on advertising that offered incentives to download the app and hid those expenses with documents that significantly understated its marketing expenditures and by routing payments through third parties.

The SEC further alleges that Shafi failed to disclose to investors that he and his fiancée, Barbara Woortmann, charged hundreds of thousands of dollars to IRL's business credit cards for personal expenses such as clothing, home furnishings and travel.

Graeme Sloan/Bloomberg

IRL was previously touted by some as a Facebook rival with its purportedly young user base. By 2021, it was valued at nearly $1.2 billion, having raised over $200 million with big-name investors such as Softbank, Goodwater Capital, Founders Fund and Floodgate.

But in April 2023, IRL's board of directors removed Shafi as CEO after learning of his and Woortmann's use of IRL credit cards for personal expenses. Shortly after, an internal investigation by the board found that 95% of its users were likely bots. 

"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," Monique Winkler, director of the SEC's San Francisco regional office, said in a statement. "Investors in this space should continue to be vigilant."

Shafi has not yet pleaded to the charge, and did not immediately respond to request for comment. 

However, Shafi shared his own recounting of his ousting on LinkedIn in July 2023. He wrote: "When I was suspended at the end of April, I was told nothing about bots. At that meeting, I was told that either I could resign or, if I did not, that a statement would be released accusing me of a 'pattern of misconduct.' I was not going to resign over a personal expenses issue, so that damaging statement went out, as warned, leading many to assume that the suspension related to bots."

The SEC's complaint was filed on Friday in the U.S. District Court for the Northern District of California. It charges Shafi with violating antifraud provisions and seeks a permanent injunctive relief, civil money penalties, disgorgement with prejudgment interest and an officer-and-director bar against Shafi.

The complaint also lists Woortmann as a relief defendant and seeks disgorgement with prejudgment interest for the personal expenses she charged to the business card that was ultimately paid with investor money.