Founder of tech unicorn once valued at $1B charged with defrauding investors

Shafi, 38, from Hawaii, allegedly defrauded investors of $170 million during the 2021 funding round for IRL, a company valued at $1 billion before its closure in June 2023, CNBC reported.

DOJ claims that Shafi inflated the app’s success by spending millions on advertising to boost user installs while misleading investors by stating that the company spent "very little" on user acquisition. These costs were allegedly concealed by invoicing them to a separate firm.

Abraham Shafi, founder and former CEO of the now-defunct IRL social media app. Photo from X

The indictment also claims that Shafi misused company funds for personal expenses, including a wedding in Hawaii, art classes, a luxury trip to Japan, and high-end shopping, according to Fortune.

These expenses were charged to IRL’s business credit cards, and Shafi reimbursed $2.5 million for some costs, although not all were repaid.

In legal filings, Shafi claimed that he never concealed his use of the same credit card for both business and personal expenses, claiming that this practice began when he personally funded the company.

In 2023, a special board committee reportedly asked Shafi to resign due to his misuse of company funds.

Shafi refused, was suspended, and by June that year, IRL’s user numbers dropped, leading to the company’s dissolution. Investors received $40 million in cash after the closure.

In 2024, the Securities and Exchange Commission filed a civil lawsuit against Shafi for similar charges. Shafi faces up to 20 years in prison for each count if convicted. Legal proceedings are ongoing.