IRL founders accuse investors of sabotaging company with fake users

The founders of IRL, Abraham Shafi and Genrikh Khachatryan, are suing their investors, claiming they deliberately sabotaged the company.

At its peak, IRL is poised to become an alternative event organizer for Gen Z, who don’t use Facebook as much.

Shafi, the CEO, is suspended from the IRL in April to investigate claims of misconduct. In June, IRL’s board discovered in its investigation that 95% of the company’s 20 million users were fake. Now, the founders say that their investors made up the 95% figure “as an excuse to close the company and return capital to shareholders.”

The lawsuit specifically names Chi-Hua Chien of Goodwater Capital, Serena Dayal of SoftBank and Mike Maples of Floodgate. From these investors, the social calendar app has raised more than $200 million, reaching a valuation of $1.17 billion; SoftBank specifically led IRL’s $170 million Series C round in 2021. Shafi and Khachatryan accused investors of wanting to shut down the company because they “stand to cover a large portion of the company’s $40 million in cash.”

IRL is defunct, but the remaining board members have denied the founders’ allegations.

“Shortly after Shafi’s suspension, IRL experienced a significant drop in daily active users almost overnight. This was not due to an outage,” IRL and its board wrote in a statement, shared by IRL spokesperson Elliot Sloane with TechCrunch. In the same report that showed 95% of users were fake, they also found “suspicious user behavior including the presence of millions of duplicate-named private groups and irregular signups from to Hotmail and Yahoo email addresses as well as burner email addresses,” the statement said. said. The forensic report showed extensive use of IP addresses from proxy servers, and individual accounts cycling through IP addresses and device types, which are signs that user behavior is not genuine.

“Based on this as well as evidence of Shafi’s misappropriation of company funds and repeated interference with the investigation, the Board – after months of review – concluded that the future prospects of the Company are not sustainable, ” the statement concluded.

Last December, the SEC conducted a ongoing investigation of the possibility that IRL misled investors, violated securities laws.

IRL is just the latest previously buzzy startup to come under fire for potentially falsified metrics. The massive one-click checkout company Bolt and co-founder Ryan Breslow are facing an SEC probe after investors raised concerns that Bolt misrepresented the company’s financial condition when trying to raising a $355 million Series E round. But after 15 months, the SEC told the company to do so probably won’t be prosecuted. And earlier this year, the SEC charged student financial aid startup Frank with defrauding JPMorgan, which bought the company for $175 million in 2021. JPMorgan filed a lawsuit alleging that Frank’s founder Charlie Javice faked millions of customers to get the bank to buy him out. company.

IRL case through TechCrunch on Scribd

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