Summarize this content to 2000 words in 6 paragraphs in Arabic Stay informed with free updatesSimply sign up to the Technology sector myFT Digest — delivered directly to your inbox.The founder of a SoftBank-backed social media app targeted at Gen Z users has been sued by US authorities for allegedly deceiving investors and burning millions of their dollars on his wedding, flights and luxury hotels.The Securities and Exchange Commission alleged in a lawsuit on Wednesday that 37-year-old Abraham Shafi, who founded a platform called IRL in 2018, fraudulently convinced backers to plough $170mn into the app while failing to disclose that it had “boosted its perceived popularity” by spending almost $6mn on advertisements that incentivised downloads.IRL, which at its height was valued at more than $1bn, was closed down in 2023 by SoftBank and other lead investors who said they had found evidence that almost all of its purported 20mn users were fake.SoftBank subsequently sued Shafi, claiming that IRL was a “sophisticated, years-long” fraud that it was hoodwinked into backing. It has demanded the return of its $150mn as well as punitive damages.In a competing lawsuit, Shafi alleged that he was made a “scapegoat” by SoftBank, which relied on inconclusive data to conclude that the app was riddled with bots and close the business in order to recoup its remaining cash and avoid further embarrassment after the high-profile blow-up of another investment in WeWork.A lawyer for Shafi did not immediately respond to a request for comment.In its filing on Wednesday, the SEC said that prior to its last fundraising round, Shafi had boasted that IRL had 12mn users and a high rank on the Apple App Store, “based on viral popularity and organic growth”.The agency alleged this description “misleadingly omitted the significant role that advertising played in Shafi’s growth strategy for IRL”. In statements to investors, he “significantly understated” the amount of money spent on marketing, the lawsuit added.The lawsuit cited a text message exchange from 2012 between Shafi and one of IRL’s venture capital backers, in which the person remarked that another prospective investor would “love” that IRL “spent virtually zero on marketing”. In response, Shafi allegedly wrote: “That’s us! Real social.”The SEC said investors were also unaware that Shafi and his wife had spent millions of dollars on personal expenses with IRL’s credit cards, buying furniture, clothing, Hawaii hotel stays and smaller items such as groceries.
