Japanese SoftBank Corporation sues social app IRL, for the development of which it has allocated investment funds in the amount of $1.1 billion.
Currently, the social platform is actually a non-existent company. The corporation’s legal claims provide for the payment of damage in the amount of $150 million. SoftBank accuses the application of fraudulent actions.
The creators of IRL initially positioned their brainchild as an alternative to organizing events for Generation Z, whose level of interest in interacting with Facebook in the virtual activity space shows a steady decline. To raise investment, the developers of the social application have created a fake user base. This summer, a special investigation was conducted, according to the results of which it was found that 95% of IRL clients are fictitious. The imagination of the creators of the application generated a database to achieve economic goals.
The text of SoftBank’s complaint contains a statement according to which the decision to invest was made under the impression of an impressive number of users, most of which, as it turned out, actually did not exist and did not exist ever. The creators of the application claimed that 25% of American citizens under the age of 28 downloaded their digital product. Also, the set of lies included a statement about an increase in the number of users by 400% year-on-year. These indicators are a sufficient reason for the decision to invest, but they have nothing to do with the real state of affairs.
Investors do not always carefully check the information about those with whom they intend to interact. SoftBank claims that it would be impossible to verify fake IRL user numbers. The corporation states that the social application business was deliberately structured within the framework of such a model, which does not allow the detection of evidence of fraud. SoftBank explains in detail its attempts to conduct due diligence before providing investment funds.
The corporation claims that IRL spent tens of thousands of dollars on proxy services to create user data using bots. SoftBank also accused the application that a certain secret firm, which is managed by the head of the IRL development department, covered up the fraud scheme, receiving hundreds of thousands of dollars a month for it.
The text of the corporation’s complaint separately states that due to the lack of a source of profit for an external investor, the main interest was the indicator of the level of user activity, which is a kind of prerequisite and basis for future income. SoftBank relied on the veracity of the partner’s statements.
IRL CEO Abraham Shafi did not say anything in response to a media request for comment on the allegations. The complaint alleges that he and five of his siblings-cousins are involved in the concealment of deception. The corporation stated that they had sold ordinary shares of IRL to SoftBank regarding the investment.
Having gained access to a third-party report on users of the social application, the corporation found that by the spring of 2021, this digital product had been downloaded only 9 million times, although Abraham Shafi spoke about 12 million active customers per month and claimed that 2 million events were planned on the platform every day. At the same time, the IRL CEO stated that the discrepancy in figures is observed due to the lack of accounting for web sessions and information about underage users, data about which cannot be shared.
The corporation notes that the social application was a virtual ghost town populated by bots imitating people demonstrating a high level of activity in the digital environment.
The SEC is currently checking the IRL. The regulator intends to find out whether there was a violation of security regarding the deception of investors.
As we have reported earlier, SoftBank and Symbiotic Collaborate to Offer Automated Warehouses.