The SEC alleges that CEO Abraham Shafi raised around $170 million by falsely portraying IRL as a social media success story. He claimed that IRL’s supposed 12 million users were gained through organic growth, but the SEC argues that the company spent millions on advertisements to attract users, hiding these expenses in its books.

IRL received multiple rounds of venture capital, reaching a $1.17 billion valuation. However, an internal investigation found that 95 per cent of the app’s users were bots, leading to its closure in 2023.

This case is part of a broader trend, with the SEC charging several venture-backed founders with fraud.

Recently, BitClout founder Nader Al-Naji was charged with fraud and unregistered securities offerings, raising over $257 million in cryptocurrency. In June, Ilit Raz, CEO of the now-defunct AI recruitment startup Joonko, was charged with defrauding investors of at least $21 million. The SEC has also targeted venture firms, charging Robert Scott Murray and Trillium Capital LLC with manipulating the stock price of Getty Images Holdings in May.