Founder of Collapsed Social Media Site 'IRL' Charged With Fraud Over Faked Users (bbc.com) 22
This week America's Securities and Exchange Commission filed fraud charges against the former CEO of the startup social media site "IRL"
The BBC reports: IRL — which was once considered a potential rival to Facebook — took its name from its intention to get its online users to meet up in real life. However, the initial optimism evaporated after it emerged most of IRL's users were bots, with the platform shutting in 2023...
The SEC says it believes [CEO Abraham] Shafi raised about $170m by portraying IRL as the new success story in the social media world. It alleges he told investors that IRL had attracted the vast majority its supposed 12 million users through organic growth. In reality, it argues, IRL was spending millions of dollars on advertisements which offered incentives to prospective users to download the IRL app. That expenditure, it is alleged, was subsequently hidden in the company's books.
IRL received multiple rounds of venture capital financing, eventually reaching "unicorn status" with a $1.17 billion valuation, according to TechCrunch. But it shut down in 2023 "after an internal investigation by the company's board found that 95% of the app's users were 'automated or from bots'."
TechCrunch notes it's the second time in the same week — and at least the fourth time in the past several months — that the SEC has charged a venture-backed founder on allegations of fraud... Earlier this week, the SEC charged BitClout founder Nader Al-Naji with fraud and unregistered offering of securities, claiming he used his pseudonymous online identity "DiamondHands" to avoid regulatory scrutiny while he raised over $257 million in cryptocurrency. BitClout, a buzzy crypto startup, was backed by high-profile VCs such as a16z, Sequoia, Chamath Palihapitiya's Social Capital, Coinbase Ventures and Winklevoss Capital.
In June, the SEC charged Ilit Raz, CEO and founder of the now-shuttered AI recruitment startup Joonko, with defrauding investors of at least $21 million. The agency alleged Raz made false and misleading statements about the quantity and quality of Joonko's customers, the number of candidates on its platform and the startup's revenue.
The agency has also gone after venture firms in recent months. In May, the SEC charged Robert Scott Murray and his firm Trillium Capital LLC with a fraudulent scheme to manipulate the stock price of Getty Images Holdings Inc. by announcing a phony offer by Trillium to purchase Getty Images.
The BBC reports: IRL — which was once considered a potential rival to Facebook — took its name from its intention to get its online users to meet up in real life. However, the initial optimism evaporated after it emerged most of IRL's users were bots, with the platform shutting in 2023...
The SEC says it believes [CEO Abraham] Shafi raised about $170m by portraying IRL as the new success story in the social media world. It alleges he told investors that IRL had attracted the vast majority its supposed 12 million users through organic growth. In reality, it argues, IRL was spending millions of dollars on advertisements which offered incentives to prospective users to download the IRL app. That expenditure, it is alleged, was subsequently hidden in the company's books.
IRL received multiple rounds of venture capital financing, eventually reaching "unicorn status" with a $1.17 billion valuation, according to TechCrunch. But it shut down in 2023 "after an internal investigation by the company's board found that 95% of the app's users were 'automated or from bots'."
TechCrunch notes it's the second time in the same week — and at least the fourth time in the past several months — that the SEC has charged a venture-backed founder on allegations of fraud... Earlier this week, the SEC charged BitClout founder Nader Al-Naji with fraud and unregistered offering of securities, claiming he used his pseudonymous online identity "DiamondHands" to avoid regulatory scrutiny while he raised over $257 million in cryptocurrency. BitClout, a buzzy crypto startup, was backed by high-profile VCs such as a16z, Sequoia, Chamath Palihapitiya's Social Capital, Coinbase Ventures and Winklevoss Capital.
In June, the SEC charged Ilit Raz, CEO and founder of the now-shuttered AI recruitment startup Joonko, with defrauding investors of at least $21 million. The agency alleged Raz made false and misleading statements about the quantity and quality of Joonko's customers, the number of candidates on its platform and the startup's revenue.
The agency has also gone after venture firms in recent months. In May, the SEC charged Robert Scott Murray and his firm Trillium Capital LLC with a fraudulent scheme to manipulate the stock price of Getty Images Holdings Inc. by announcing a phony offer by Trillium to purchase Getty Images.
OK, I think I understand... (Score:5, Insightful)
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I presume the users were not paying. If they were paying to create an account based on the premise that the network were real users, then they could sue for fraud and get a refund. They probably would not, because it's peanuts, and who would bother with a class action on a failed company. But investors are a small number of people who have put a lot of money. It makes sense for them to sue and try hard recover what they still can, or try to have the perpetrator punished.
Re:OK, I think I understand... (Score:5, Informative)
But investors are a small number of people who have put a lot of money. It makes sense for them to sue and try hard recover what they still can, or try to have the perpetrator punished.
Yeah, or investors could realize investing in social media is corruptly risky, and has always been.
Fake users and massive losses is NOW considered fraud? Where the fuck was this when the Kartrashians were bragging about their millions of “followers” they bought in the early years of their viral whoredom, and Snapchat was losing hundreds of millions every year claiming they’re worth billions in a fucking IPO? Most social media today wouldn’t exist if those common sense rules were applied long ago.
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Making claims about the company products or services when SELLING the company or company products and services it is where you start to run into problems.
Think about it, claiming there are millions of users as a way to get new users to pay money...yea, that's where those users have been scammed. Claiming the value of what your company owns when selling that company, then the buyer is being scammed. Making false claims on quarterly results for a company that is publicly traded on the stock market is sca
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Musk had a valid complaint when he tried to get out of the deal to buy Twitter for example, but the way things were structured for the deal must have been horribly structured where he HAD to close on the deal.
Yes, he had too much faith in his ability to manipulate the government, so he accepted a deal he couldn't back out of. Then when he failed to do due diligence and then about the results, he was told it was his own fault. This was a victory for everyone but him, and the Saudis that mostly bankrolled the purchase.
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And advertisers who buy ads based on viewers. Everyone wants to be the next zuckerfuck. Expect a lot of cheating. I would suggest not wasting your time on these platforms. They will milk your soul.
So like Silicon Valley but IRL? (Score:1)
⦠by IRL.
Okay now when is (Score:2)
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Facebook isn't looking to sell the company. Twitter, or X, or whatever you want to call it, is just a mess, but Musk had a valid grievance about the number of bots before he bought the company, and honestly, he should have had the company investigated rather than finalizing the purchase.
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Which he has abandoned because he needs it to appear there are "real" users on his failing site. He's so desperate to keep things going he's contemplated suing companies [arstechnica.com] who don't advertise on Twitter.
You know, because they're exercising their free speech.
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It might have been valid, but his pre-purchase agreement meant he still had to go through with the sale so an investigation at that point wouldn't have helped him
*Cough*Reddit*Cough* (Score:3, Informative)
*Cough*Reddit*Cough*
How about going after real social media fraudsters (Score:2)
Zuckerberg has earned his day in court many times over. Why is he still a free man?
Of yeah... He shafted all of us but not the Facebook shareholders. Because that's what really counts in America.
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When he sells data to Cambridge Analytica for the purpose of skewing election results, he shafts you and me and everybody.'
When Facebook makes our children neurotic, he knows it full well and he won't do a damn thing about it, he hurts you and me and everybody.
When Facebook keeps shadow accounts of everybody and keeps everybody under surveillance, he hurts you and me and everybody.
Facebook needs to be broken up and Fuckerberg should be thrown in the slammer like the fucking nefarious psychopath he is.
Now make other social media sites block fake users (Score:2)
Certain social media sites are infested with bots generating disinfo, misinfo, spam, porn, ads, fake content and amplifying the same. There should be a legal obligation on these sites to eliminate inauthentic interactions by all means available. And face heavy fines and other sanctions if they do not.
And AI companies themselves should have an obligation to help here too, to flag suspect accounts engaging in inauthentic behaviour. And to provide APIs for social media firms to perform spot checks on suspect a
Funny stuff (Score:1)
These high tech fraud schemes are actually funny in their arrogance. My favorite was Nicola...look it up for a laugh.
Never heard of it (Score:2)
The "bot problem" on social media isn't a problem (Score:2)
And it's a design goal because the market valuation of these sites is driven by the number of users -- not because that's the most valid metric, but because it's the easiest to measure. So everything about Facebook, Twitter, Reddit, etc., has been designed from the early whiteboard stage to the present day, to facilitate enormous numbers of bots. The operators of these sites can then in turn claim "we're deleting millions of bot accounts" and that might be true, but while they were d