SEC Charges "IRL" With Defrauding Investors About Company's Growth

SEC Charges Founder of Social Media Company “IRL” with $170 Million Fraud

The Securities and Exchange Commission today charged Abraham Shafi, the founder and former CEO of Get Together Inc., a privately held social media startup known as “IRL,” with defrauding investors by making false and misleading statements about the company’s growth and concealing his and his fiancée’s extensive use of company credit cards to pay for personal expenses.

According to the SEC’s complaint, Shafi, who resides in Pepeekeo, Hawaii, raised about $170 million from investors by portraying IRL as a viral social media platform that organically attracted the vast majority of its purported 12 million users. In reality, IRL spent millions of dollars on advertisements that offered incentives to download the IRL app. Shafi hid those expenditures with offering documents that significantly understated the company’s marketing expenses and by routing advertising platform payments through third parties. The SEC’s complaint further alleges that Shafi failed to disclose to investors that he and his fiancée, Barbara Woortmann, charged hundreds of thousands of dollars to IRL’s business credit cards for personal expenses, including for clothing, home furnishings, and travel.

CrowdStrike Hit with Outage-Related Securities Suit

The July 19, 2024 CrowdStrike Outage, which has been called the “largest outage in the history of information technology,” disrupted airlines, hospital, hotels, banks, retail businesses, and many other critical cogs in the wheels of commerce. The disruption and adverse publicity surrounding the incident also caused CrowdStrike’s share price to decline as well – over the course of several days following the incident, its shares declined about 30%, representing a market capitalization drop of nearly $12.5 billion. In a world where “everything, everywhere is securities fraud,” this surely seemed like a situation that would produce a securities class action lawsuit. Yet, surprisingly, no securities suit was filed. That is, until now.

Corporate Attorneys Brace for Impact of New Delaware Board Law

Delaware’s new corporate law amendments taking effect Thursday reinforce common practices vulnerable to litigation, after a landmark court order invalidating a billionaire founder’s veto rights over board decisions, corporate attorneys say.

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William Regner, a partner at Debevoise & Plimpton, said the amendments will allow clients to be “a bit more relaxed about putting something in an agreement rather than in a charter.”

The new law is “trying to create fewer targets for plaintiffs,” he said. “That’s been something that Delaware’s been very focused on—trying to tamp down vexatious litigation.”

SEC Insider Trading Case Presents Liability Risk for Employers

Because the SEC’s victory came in the form of a jury verdict, there is no opinion articulating the basis on which the jury concluded the defendant breached a duty to his employer by using information he learned through his employment to trade in another company’s securities. As a result, employers are left wondering what the Panuwat verdict means for them and their employees.

One thing is clear: The SEC will chalk this win up as validation. SEC enforcement chief Gurbir Grewal reportedly suggested that if the agency received an adverse verdict at trial, it should think twice about bringing a similar case. Having now passed this test, it’s safe to assume the inverse is also true.

Below are some provisions under which the SEC may attempt to extend shadow insider trading liability to employers.

Commentary: Innovation with unintended consequences in the securities litigation landscape outside the U.S.

But for U.S. investors familiar with the well-trodden and clearly lit path of U.S. class actions, this can be a tricky area to navigate elsewhere, particularly in Europe where each jurisdiction has its own process and rules to navigate. Cases only get off the ground if they have significant investor support because most operate on an opt-in basis — meaning that rather than already being part of the class action passively through historic investments (as is the norm in the U.S.), investors must choose whether or not to participate before an action commences.

This is an active legal decision that requires careful consideration and due diligence and one that responsible investors cannot take lightly. It is also not straightforward. The increasing competition among law firms and litigation funders who are in turn generating a multitude of cases, means that it can be challenging for U.S. investors to compare the various offerings.

Judge Approves 45-Day Prison Delay for Ex-FTX Executive ‘Mauled’ by German Shepherd

A federal district court in New York approved a 45-day continuance for a former FTX Digital Markets Ltd. executive to start his 90-month prison term following an animal mauling his face.

Mark E. Bini, a partner at Reed Smith in its New York and Miami offices who is a former federal prosecutor not involved in the case, said the ruling by U.S. District Judge Lewis A. Kaplan of the Southern District of New York appeared to be routine.

The defendant is ex-FTX CEO Ryan Salame. Mark E. Bini, partner with Reed Smith. “The defendant asked for an adjournment of his surrender date for surgery, attaching a doctor’s note that is redacted,” Bini said in an email. “Defendants about to be sentenced who have medical issues often try and treat them before they begin incarceration because, unfortunately, they are unlikely to receive great medical care in prison.”