IRL founders Abraham Shafi and Genrikh Khachatryan are suing their investors, claiming they intentionally sabotaged the company.
At its peak, IRL was poised to become an event-planning alternative for Gen Z, which is I use Facebook less and less.
Shafi, the CEO, was suspended IRL in April to investigate allegations of misconduct. In June, IRL’s board of directors discovered during its investigation that 95% of the company’s 20 million users were fake. Today, the founders claim their investors made up that 95% figure “as an excuse to close the company and return capital to shareholders.”
The lawsuit specifically names Chi-Hua Chien of Goodwater Capital, Serena Dayal of SoftBank and Mike Maples of Floodgate. Thanks to these investors, the social calendar app has raised more than 200 million dollars, reaching a valuation of $1.17 billion; SoftBank in particular led IRL’s $170 million Series C round in 2021. Shafi and Khachatryan accused investors of wanting to shut down the company because they “wanted to cover the lion’s share of the $40 million dollars of the company’s available liquidity.
IRL has disappeared, but other board members deny the founders’ allegations.
“Shortly after Shafi’s suspension, IRL experienced a significant drop in daily active users virtually overnight. This was not due to an outage,” IRL and its board of directors wrote in a statement that IRL spokesperson Elliot Sloane shared with TechCrunch. In the same report that showed 95% of users were fake, they also found “suspicious user behavior, including the presence of millions of private groups with identical names and irregular registrations from email addresses Hotmail and Yahoo as well as burner email addresses,” the statement said. said. The forensic report showed heavy use of proxy server IP addresses and individual accounts browsing IP addresses and device types, indicating that the user behavior was not genuine.
“Based on this as well as evidence of Shafi’s misappropriation of company funds and his repeated interference in the investigation, the Board – after months of review – concluded that the company’s future prospects were not sustainable,” the statement concluded.
Since last December, the SEC has been investigating ongoing investigation on the possibility that IRL misled investors, in violation of securities laws.
IRL is just the latest once-lively startup to come under fire for potentially falsified metrics. The massive one-click payment company Bolt and co-founder Ryan Breslow was the subject of an SEC investigation after investors raised concerns that Bolt misrepresented the company’s financial condition while attempting to raise a $355 million Series E round. But after 15 months, the SEC told the company it probably won’t be charged. And earlier this year, the SEC charged the start of student financial aid Franc by defrauding JPMorgan, which purchased the company for $175 million in 2021. JPMorgan filed a lawsuit alleging that Frank’s founder, Charlie Javice, swindled customers out of millions to get the bank to buy his company.