The founder of a social media startup has been charged by the SEC over a $170 million fraud where company credit cards were used to fund lavish expenses.
Abraham Shafi is the founder and former CEO of Get Together Inc., a privately held social media startup known as “IRL.”
He has been charged with defrauding investors by making false and misleading statements about the company’s growth and concealing his and his fiancée’s extensive use of company credit cards to pay for personal expenses.
The SEC alleges Shafi, of Pepeekeo, Hawaii, raised about $170 million from investors by portraying IRL as a viral social media platform that organically attracted the vast majority of its purported 12 million users.
However, the SEC claims IRL actually spent millions of dollars on advertisements offering incentives to download the IRL app.
Shafi is accused of hiding those expenditures by offering documents that significantly understated the company’s marketing expenses and by routing advertising platform payments through third parties.
The SEC’s also claims 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, including clothing, home furnishings, and travel.
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Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, said: “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.
“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.
The complaint also names Woortmann as a relief defendant and seeks disgorgement with prejudgment interest for the personal expenses she charged to an IRL credit card that were ultimately paid with investor money.
