SEC Charges Abraham Shafi with Fraudulent Activities at Get Together Inc.
The SEC’s Allegations Against Abraham Shafi
The SEC has charged Abraham Shafi, the founder and former CEO of Get Together Inc., a social media startup known as “IRL.” Shafi is accused of defrauding investors by making false and misleading statements about the company’s growth and concealing personal use of company credit cards.
Misleading Investors with False Claims of Growth
According to the SEC, Shafi, a resident of Pepeekeo, Hawaii, raised approximately $170 million from investors. He portrayed IRL as a viral social media platform that organically attracted most of its purported 12 million users. However, the reality was different. IRL spent millions on advertisements offering incentives to download the app, which Shafi hid by understating the company’s marketing expenses in offering documents and routing payments through third parties.
Concealing Personal Expenses
The SEC’s complaint further alleges that Shafi and his fiancée, Barbara Woortmann, charged hundreds of thousands of dollars to IRL’s business credit cards for personal expenses. These expenses included clothing, home furnishings, and travel, which were not disclosed to investors.
SEC’s Response to the Alleged Fraud
Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, stated, “As we alleged, Shafi took advantage of investors’ appetite for investments in the pre-IPO technology space and fraudulently raised approximately $170 million by lying about IRL’s business practices.” She urged investors to remain vigilant in this space.
Legal Actions and Charges
The complaint filed by the SEC in the U.S. District Court for the Northern District of California alleges that Shafi violated the antifraud provisions of federal securities laws. The SEC is seeking permanent injunctive relief, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Shafi. In addition, Woortmann is named as a relief defendant in the complaint, and the SEC is seeking disgorgement with prejudgment interest for personal expenses she charged to an IRL credit card, which were ultimately paid with investor funds.
Implications for the Technology Investment Sector
This case highlights the risks associated with investing in pre-IPO technology companies. Investors are encouraged to thoroughly vet their companies and be wary of misleading claims. The SEC’s actions serve as a reminder that fraudulent activities will be prosecuted to protect investors and maintain market integrity.
The SEC continues to monitor and take action against fraudulent activities in the investment space, ensuring that investor interests are safeguarded. This case is a significant example of the importance of transparency and honesty in business practices, especially in the rapidly evolving tech sector.
Final Thoughts:
If you are managing a private fund or investment partnership, DO NOT use the fund or partnership money or credit cards to pay personal expenses. While you and your accountant can properly allocate those payments and charges, it is almost a guarantee that the SEC will claim you are using investor funds to pay personal expenses. – Mark
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.