DOJ Charges Former CEO of Social Media Company “IRL” With $170 Million Fraud

Former Silicon Valley CEO Charged with Fraud and Obstruction of Justice

A federal grand jury in the Northern District of California returned an indictment charging a Hawaii man with wire fraud, securities fraud, and obstruction in connection with a scheme to defraud investors of $170 million as the CEO and Founder of the social media company Get Together, a privately held social media startup known as “IRL”.

According to court documents, Abraham Shafi, 38, of Pepeekeo, Hawaii, allegedly committed fraud in connection with Get Together’s 2021 “Series C” funding round, which raised $170 million at a valuation of over $1 billion. In seeking investment, Shafi told potential investors that IRL was spending only $50,000 a month in paid advertising and that user signups “were not incentivized or paid.” However, Shafi had spent millions of dollars on paid advertising in the form of incentive advertising, a form of advertising in which users are provided a reward in a third-party app if they download IRL. In the lead up to Series C, Shafi asked his vendor for a “big burst” of ads for “a few days” to drive more installs of the IRL app. During the Series C process, investors specifically asked about paid advertising, and Shafi falsely responded that “[u]nlike other apps that spend aggressively to acquire new users, we spend very little.” Shafi concealed IRL’s spending on incentive ads by having them invoiced to a third-party firm, ensuring that the nature and amount of the expense did not appear on IRL’s ledger.

Musk seeks dismissal of SEC lawsuit on his 2022 Twitter stake

Billionaire Elon Musk filed a motion on Thursday to dismiss the U.S. Securities and Exchange Commission’s (SEC) civil lawsuit that accused him of waiting too long in 2022 to reveal his large stake in social media platform Twitter, later renamed as X.

In a complaint filed in Washington, D.C. federal court in January, the SEC said Musk violated federal securities law by waiting 11 days too long to disclose his initial purchase of 5% of Twitter’s common shares. It sought to force Musk to pay a civil fine and give up profits that the SEC said were a result of the violations.

Lawyers for Musk said on Thursday the billionaire stopped purchasing additional shares of then-publicly-listed Twitter and filed his disclosure one business day after his wealth manager consulted securities disclosure counsel about potential filing requirements. […]

“The SEC does not allege that Mr. Musk acted intentionally, deliberately, willfully, or even recklessly… Rather, the SEC alleges that Mr. Musk late-filed a single beneficial ownership form three years ago, and fully corrected any alleged error immediately upon its discovery. There is no ongoing violation,” the Tesla and SpaceX CEO’s lawyers said.

Bipartisan House Stock Trading Ban Teed Up For Recess Return

Members of Congress and their spouses would be banned from trading stocks under a bipartisan plan set to be rolled out almost immediately after lawmakers return to Washington in September.

The proposed legislation, in its current form, would block members of Congress and their spouses from trading stocks, a person with direct knowledge of the legislative text told Bloomberg Government. It would also impose a penalty on any violator to include the disgorgement of all profits made from a trade to the Treasury Department, in addition to a fine worth 10% of the volume of the trade.

Meme-stock hedge fund management

One thing you could do, as a hedge fund manager, is conduct rigorous fundamental analysis of public companies and buy the stocks that you think are fundamentally undervalued. Another thing you could do, as a hedge fund manager in the 2020s, is try to predict which stocks will capture the attention of retail investors online and become meme stocks.

A third thing you could do, though, is buy stocks and try to make them meme stocks…. […]

Anyway we have talked a little bit about Eric Jackson, who runs a firm called EMJ Capital and who has tweeted early and often about Opendoor Technologies Inc., which became a big meme stock last month in part because of his efforts. His latest schtick on X is apparently that he is …. standing outside of Drake’s house in Toronto “until he buys at least ONE share of $OPEN”? I’m sure that there is some reason for this, though I don’t know what it is and don’t especially want to find out. He’s holding up signs each day, saying things like “BUY $OPEN” and “KENDRICK SUCKS.” Apparently Drake isn’t even there? Eventually Citadel is going to hire someone to do this sort of thing.