{"id":1261748,"date":"2023-08-07T11:37:46","date_gmt":"2023-08-07T06:07:46","guid":{"rendered":"https:\/\/trak.in\/stories\/?p=1261748"},"modified":"2023-08-07T11:38:22","modified_gmt":"2023-08-07T06:08:22","slug":"softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders","status":"publish","type":"post","link":"https:\/\/trak.in\/stories\/softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders\/","title":{"rendered":"SoftBank Invested Rs 1300 Crore In This Social App Whose 95% Users Are Fake! Lawsuit Filed Against Founders"},"content":{"rendered":"\n<p>SoftBank seeks to sue a social app it had once invested in, <a href=\"https:\/\/www.irl.com\/\">IRL<\/a> at a $1.1 billion valuation.<\/p>\n\n\n\n<p>It is suing the now-defunct company for fraud, alleging $150 million in damages.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"465\" src=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2023\/08\/Untitled-design-4-2.png\" alt=\"SoftBank Invested Rs 1300 Crore In This Social App Whose 95% Users Are Fake! Lawsuit Filed Against Founders\" class=\"wp-image-1261775\" srcset=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2023\/08\/Untitled-design-4-2.png 1000w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2023\/08\/Untitled-design-4-2-300x140.png 300w, https:\/\/trak.in\/stories\/wp-content\/uploads\/2023\/08\/Untitled-design-4-2-768x357.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure>\n\n\n\n<p><strong>Background<\/strong><\/p>\n\n\n\n<p>IRL had the potential to become an event organizing alternative for Gen Z, who are using Facebook less and less.<\/p>\n\n\n\n<p>It sought to materialize on this and its self-reported numbers were impressive enough to earn a $170 million Series C funding led by SoftBank in 2021.<\/p>\n\n\n\n<p>However, earlier this summer, an internal investigation by its own board of directors found that 95% of the app\u2019s users were fake.<\/p>\n\n\n\n<p><strong>False user download claims<\/strong><\/p>\n\n\n\n<p>SoftBank explains that it was encouraged to invest due to its impressive user numbers.<\/p>\n\n\n\n<p>The app claimed it had been downloaded by 25% of U.S. teens under 28 years old and was growing at a 400% year-over-year rate.<\/p>\n\n\n\n<p>However, the internal probe found that none of these figures were accurate.<\/p>\n\n\n\n<p><strong>Fraudulent activities<\/strong><\/p>\n\n\n\n<p>SoftBank claims it wouldn\u2019t have been possible to verify IRL\u2019s fake user numbers, since it had \u201cprepared for SoftBank\u2019s due diligence and structured IRL\u2019s business so that SoftBank could not discover evidence of their fraud.\u201d<\/p>\n\n\n\n<p>The Japanese investment firm claims that IRL was spending tens of thousands of dollars on proxy services to deceptively inflate IRL\u2019s user data with bots.<\/p>\n\n\n\n<p>It also accused IRL of paying hundreds of thousands of dollars per month to a secret firm operated by its head of Growth to cover up such activities.<\/p>\n\n\n\n<p><strong>Accused is the sole provider of data<\/strong><\/p>\n\n\n\n<p>\u201cBecause IRL did not have any profitable revenue stream, its value to an outside investor like SoftBank depended on its active user metrics as a source of potential future income<\/p>\n\n\n\n<p>Thus, SoftBank relied on the accuracy of representations from IRL\u2019s executives concerning both the quantity and quality of IRL\u2019s users&#8221;, its complaint stated.<\/p>\n\n\n\n<p><strong>Exaggerated numbers<\/strong><\/p>\n\n\n\n<p>Data said that by spring 2021, IRL had only been downloaded 9 million times.&nbsp;<\/p>\n\n\n\n<p>IRL CEO Abraham Shafi was claiming that the app had 12 million monthly active users, and that 2 million events got planned each day on the platform.&nbsp;<\/p>\n\n\n\n<p>He deflected questions over this discrepancy by saying that the number accounted neither for web sessions, nor underage users, whose data could not be shared.<\/p>\n\n\n\n<p><strong>More bots than humans<\/strong><\/p>\n\n\n\n<p>\u201cIn reality, the platform was a virtual <a href=\"https:\/\/techcrunch.com\/2023\/08\/04\/softbank-sues-irl-over-elaborate-scheme-that-swallowed-150m\/\">ghost <\/a>town, filled with bots deceptively mimicking active human users,\u201d SoftBank wrote.<\/p>\n\n\n\n<p>Shafi along with five of his siblings and cousins, who SoftBank alleges were part of this cover-up are the defendants in this case.&nbsp;<\/p>\n\n\n\n<p>Each of these individuals sold IRL common stock to SoftBank in connection with these investments.<\/p>\n\n\n\n<p>IRL is also facing scrutiny by the SEC to determine whether the app violated security laws by misleading investors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>SoftBank seeks to sue a social app it had once invested in, IRL at a $1.1 billion valuation. It is suing the now-defunct company for fraud, alleging $150 million in damages. Background IRL had the potential to become an event organizing alternative for Gen Z, who are using Facebook less and less. It sought to [&hellip;]<\/p>\n","protected":false},"author":24,"featured_media":1261775,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[2316,317],"class_list":["post-1261748","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-irl","tag-softbank"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>SoftBank Invested Rs 1300 Crore In This Social App Whose 95% Users Are Fake! Lawsuit Filed Against Founders - Trak.in - Indian Business of Tech, Mobile &amp; Startups<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/trak.in\/stories\/softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"SoftBank Invested Rs 1300 Crore In This Social App Whose 95% Users Are Fake! Lawsuit Filed Against Founders - Trak.in - Indian Business of Tech, Mobile &amp; Startups\" \/>\n<meta property=\"og:description\" content=\"SoftBank seeks to sue a social app it had once invested in, IRL at a $1.1 billion valuation. It is suing the now-defunct company for fraud, alleging $150 million in damages. 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It sought to [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/trak.in\/stories\/softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders\/\" \/>\n<meta property=\"og:site_name\" content=\"Trak.in - Indian Business of Tech, Mobile &amp; Startups\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-07T06:07:46+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-07T06:08:22+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/trak.in\/stories\/wp-content\/uploads\/2023\/08\/Untitled-design-4-2.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"465\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Shreya Bose\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Shreya Bose\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/trak.in\/stories\/softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders\/\",\"url\":\"https:\/\/trak.in\/stories\/softbank-invested-rs-1300-crore-in-this-social-app-whose-95-users-are-fake-lawsuit-filed-against-founders\/\",\"name\":\"SoftBank Invested Rs 1300 Crore In This Social App Whose 95% Users Are Fake! 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