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Abraham Shafi, the entrepreneur behind the once-buzzy social media app IRL, is facing federal charges alleging a $170 million investor fraud, the Department of Justice announced Wednesday. The indictment stems from the company’s 2021 Series C funding round, a period when IRL was valued at a staggering $1 billion.
Shafi, 38, of Hawaii, was indicted by a grand jury in Oakland on counts of wire fraud, securities fraud, and obstruction of justice, according to the DOJ. The charges paint a picture of a founder allegedly misleading investors to secure significant capital.
Get Together, the parent company of IRL, pitched the app as a platform for organizing real-world events and activities. While it gained initial traction, even ranking among Apple’s top social apps in 2018, IRL ultimately shuttered its operations in June 2023.
The core of the DOJ’s case revolves around allegations that Shafi orchestrated a scheme to inflate the app’s user base leading up to the Series C funding. According to the indictment, Shafi purportedly spent millions on incentive advertising to artificially boost app installs, while simultaneously assuring investors that the company spent “very little” on acquiring new users. To further conceal these expenses, the DOJ alleges that Shafi invoiced the marketing spend to a separate, undisclosed firm.
But the alleged misuse of funds doesn’t stop there. The indictment goes further, claiming that Shafi and his fiancée siphoned off investor capital for personal luxuries. These expenses allegedly included lavish hotel stays, designer clothing, home furnishings, art classes, and hundreds of thousands of dollars funneled into Shafi’s wedding, covering airfare and luxury accommodations for wedding guests.
Back in February 2018, Shafi asserted to CNBC that investors were drawn to IRL’s potential to challenge social media giants like Facebook and Snapchat. The company attracted notable backers, including Peter Thiel’s Founders Fund and the venture capital firm Floodgate.
Notably, Shafi’s co-founders at IRL included Scott Banister, an early investor in Facebook and the first board member of PayPal, adding a layer of Silicon Valley pedigree to the venture.
The DOJ indictment names Shafi alone, who could face a maximum sentence of 20 years in prison for each count if convicted.
The Securities and Exchange Commission (SEC) also filed a civil lawsuit against Shafi last year, mirroring the allegations of fraudulent activity.
“Shafi capitalized on investors’ eagerness for investments in pre-IPO technology and fraudulently raised approximately $170 million by misrepresenting IRL’s business practices,” stated Monique Winkler, Director of the SEC’s San Francisco Regional Office, in a press release at the time.
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