The U.S. Department of Justice said Wednesday that the founder of the parent company of offline social app IRL has been charged with defrauding investors out of $170 million during the company's 2021 funding round.
The Department of Justice stated that a federal grand jury in Oakland federal court has filed charges against 38-year-old Abraham Shafi from Hawaii, alleging wire fraud, securities fraud, and obstruction of investigation, all related to the fraudulent scheme.
Shafi served as CEO of "Get Together," IRL's parent company. After completing Series C funding in 2021, the company reached a valuation of $1 billion. IRL was a platform for users to organize events and socialize offline, which ceased operations in June 2023. The app gained market attention in 2018, ranking among the popular social apps on Apple's App Store.
The Department of Justice indicated that allegedly before the Series C funding round, Shafi spent millions of dollars on incentivized advertising to boost app downloads, but told investors that the company invested "very little" in acquiring new users.
The Department of Justice stated that Shafi subsequently concealed these expenses by billing them to another company.
The indictment also alleges that the CEO and his fiancée used investor funds for "staying at luxury hotels, purchasing luxury clothing, shopping at home retailers, paying tens of thousands of dollars for art classes, and spending hundreds of thousands of dollars on Shafi's wedding — including paying for wedding guests' airfare and luxury hotel accommodations."
Shafi stated in February 2018 that investors supported the company because they saw its potential to compete with Facebook (now Meta) and Snapchat. IRL's investors included Peter Thiel's Founders Fund and venture capital firm Floodgate.
Shafi's co-founders at IRL included Scott Banister — the first board member of PayPal and one of Facebook's early investors.
The Department of Justice indictment mentions only Shafi. The Department of Justice stated that he could face up to 20 years in prison for each charge.
Last year, the Securities and Exchange Commission (SEC) filed a civil lawsuit against Shafi regarding the same alleged fraudulent scheme.
"Shafi exploited investors' interest in pre-IPO technology investments by fraudulently raising approximately $170 million through misrepresenting IRL's business operations," said Monique Winkler, director of the SEC's San Francisco Regional Office, in a statement at the time.