Less than two months after a San Francisco-based social media company shut down, SoftBank is suing the former CEO and several of his family members for allegedly defrauding the venture firm.
Legally known as Get Together Inc., IRL shut down in June after its own board of directors launched an internal investigation into the company's metrics and found that 95% of its users were fake.
The suit names IRL's co-founder and CEO Abraham Shafi as a defendant, along with several of his family members who were involved with the company, and alleges that they misled and defrauded the Japanese firm's Vision Fund 2.
SoftBank invested $150 million into IRL during the company's Series C round in May 2021, the complaint says. Bloomberg Law first reported the lawsuit last week. That investment included $7.5 million-worth of shares that SoftBank bought from Shafi, the complaint says.
Shafi co-founded IRL in 2016 and the company had raised nearly $200 million in venture funding before shutting down in June.
The company's valuation was $57 million in September 2020 and then skyrocketed to nearly $1.2 billion after its Series C round closed in June 2021.
At that time, IRL told the San Francisco Business Times and other news outlets that it had 12 million users.
"I would not be surprised if SoftBank saw an analog for our ability to become the WeChat for the rest of the world," Shafi told the Business Times in 2021.
IRL allegedly paid for fake user bots and Shafi and his family members concealed the company's real usage data from other employees, the complaint says.
SoftBank also claims in the lawsuit that Shafi told the firm, during its due diligence process, that the company's growth was "nearly entirely organic" when it was actually "spending hundreds of thousands of dollars monthly to boost its user population."
"Defendants had prepared for SoftBank’s due diligence and structured IRL’s business so that SoftBank could not discover evidence of their fraud," the complaint says.
IRL also deleted evidence of its fraudulent activity after being subpoenaed by the SEC, the complaint alleges.
The Securities and Exchange Commission was reportedly investigating IRL for securities fraud late last year.
By early 2022, the company was boasting to potential investors that it had grown its user base to 20 million users, according to a former employee who filed a lawsuit against IRL earlier this year.
The board suspended Shafi as CEO in April before it made the decision to wind down the company.
An attempt to reach Shafi for comment was unsuccessful.
Startups that closed in 2022
S.F.-based Pragli, also known as Pesto, was developing office productivity software to enable virtual meetings. The co-founders announced that the company would shut down on Nov. 12. They founded it in 2019 and raised $6 million, according to PitchBook.
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Palo Alto-based Kittyhawk, the autonomous aircraft developer backed by Google co-founder Larry Page, announced in September that it was winding down its operations and laying off its workforce. It raised an estimated $75 million, according to PitchBook.
Sunnyvale-based Omnee, also known as Omnify, was creating location-based analytics for places like malls and shopping centers. The company raised $2.8 million since 2018 and shut down in September, according to PitchBook.
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Self-cleaning glass technology company InnovaSonic filed for Chapter 7 bankruptcy protections in September. The Dublin-based company raised $260,000 since 2016, according to PitchBook.
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San Mateo-based home buying company Reali laid off its entire workforce, or 140 people, and shut down in August. It raised $160 million since 2015, according to PitchBook.
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Sonoma-based spirits manufacturer Haus announced in August that it was shutting down after an investor pulled out of a funding round, according to the SF Chronicle. It raised $8.5 million since 2019, according to PitchBook.
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Nexkey was developing smart locks for keyless entry, but the San Mateo company shut down in August and raised just over $10 million since 2013, according to PitchBook.
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Mountain View-based Presdo was developing a management and analytics platform for events. It was founded in 2007 and had raised $3.1 million before shutting down in August, according to PitchBook.
Cinova was optimizing video for streaming. It had raised $18.5 million since 2005 and shut down in August, according to PitchBook.
Short-term rental startup WanderJaunt shut down in July, impacting as many as 200 workers and sending users with active reservations scrambling. It had raised $57 million since 2016, according to PitchBook.
Provided by WanderJaunt
Mountain View-based Veriphyr Inc. filed for Chapter 7 protections in July. The company developed software to help health care provider comply with privacy laws.
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The Redwood City biotech filed for Ch. 11 bankruptcy in July, according to the WSJ, and in September, a bankruptcy court approved the sale of Genapsys's assets to a group of investors for $42 million, according to Law360.
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San Mateo-based SummerBio launched in 2020 and developed an automated system to process Covid-19 tests quickly but in June announced it was shutting down and laying off its entire workforce. In August, the company said it was going into "standby-mode." It raised a little over $7 million, according to PitchBook.
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Palo Alto-based Carfit was developing a way to monitor vibrations in a car to predict maintenance needs. The company shut down in May and raised just under $7 million since 2016, according to PitchBook.
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Founders Den, a networking and co-working space for startup founders based in San Francisco, filed for Chapter 7 bankruptcy in May. It was founded by Jonathan Abrams, Jason Johnson (pictured on the right), Michael Levit and Zachary Bogue.
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Ontera, a Santa Cruz diagnostics company, was developing a hand-held device with biosensors. It shut down in April and had raised just over $65 million since 2011, according to PitchBook.
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Mountain View-based Athenascope was developing a tool to make it easier for gamers to grab gameplay highlights. It shut down in April and raised $12.3 million since 2018, according to PitchBook.
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MySupport was building a platform for seniors and people with disabilities to connect with service providers. The S.F. company raised just over $1 million since 2014 and shut down in April, according to PitchBook.
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San Jose-based MIODx was developing a diagnostics platform centered around adaptive immune response. It raised $1.5 million since 2014 and went out of business in April, according to PitchBook.
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Berkeley and Fresno-based Zero Grocery was building a grocery delivery marketplace focused on reducing plastic waste that partnered with local producers, but shutdown in March a month after announcing a $12 million seed round.
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Based in Palo Alto, Mesmer Eyes was developing AI-powered bots intended to help accelerate product development and testing. The company raised $19 million since 2017 and shut down in March, according to PitchBook.
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Mountain View-based Matter was a platform for musical artists to monetize their work. The company raised $650,000 since 2018 and shut down in June, according to PitchBook.
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Redwood City-based Voiq was founded in 2011 and shut down in March, according to PitchBook. The company was developing conversational AI assistants for customer services and sales.
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USB Promos created promotional USB products. It raised nearly $4 million since 2006 and shut down in March, according to PitchBook.
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S.F.-based Plethora was creating a "manufacturing-as-a-service" business. It over $47 million, including debt, since 2013 and shut down in March, according to PitchBook.
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Wage was developing employment and income verification tools but the Palo Alto company shut down in March, according to PitchBook. It had raised $5 million since 2018.
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Visbit was developing a streaming video platform that would maintain high definition even over wireless networks. The Sunnyvale company raised $8.2 million since 2015 and shut down in February, according to PitchBook.
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Akora Labs was developing a tool called Shuffle for sharing podcast clips. The S.F. company was founded in 2020, raised $2 million and shut down in February, according to PitchBook.
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Multerra Bio was developing diagnostics devices that could be used for multiple tests. The S.F. company was founded in 2015 and raised $3.5 million before shutting down in January.
The Consumer Financial Protection Bureau sued Oakland-based loan startup LendUp in 2021 for violating a 2016 consent decree and engaging in "illegal and deceptive marketing." It shutdown down its main operations in January 2022, according to PitchBook, and its parent company, Ahead Money, reportedly started liquidating its assets in August, according to Protocol. It had raised nearly $375 million, including debt, since 2012, according to PitchBook.
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