More Startup Litigation
Boardroom Governance Newsletter #43 | August 10, 2023.
The latest alleged fraud case in a Silicon Valley private venture-backed company involves a unicorn company called IRL, a social media app for Generation Z that shut down earlier this year.
According to IRL’s former CEO Abraham Shafi, by 2021 IRL’s mobile app had been downloaded by 25% of US Teens under 18 years old; IRL had 12 million monthly active users; and IRL was growing at a “meteoric” 400% year-over-year rate.
These growth metrics led to a $150 million investment by Softbank in May of 2021. SoftBank purchased $125 million of IRL Series C Preferred shares from IRL directly and $25 million of IRL common stock from IRL insiders, including Shafi who got ~$7.5 million. SoftBank’s share purchase was based on a pre-money valuation of IRL of $1 billion.
However, according to a new lawsuit filed by Softbank against Shafi and five siblings and cousins:
“Only after a series of whistleblower complaints, an SEC investigation, an internal investigation by a special committee of…
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