Soft Bank’s Vision Fund (SFTBY) I has sued a social media startup alleging that it had faked user numbers and engagement. The startup was founded by a group, who were related. Masayoshi Son led Soft Bank has alleged that the startup In Real Life (IRL) had inflated user metrics and had also lied about its performance to the Vision Fund and received millions of dollars from it.
The complaint filed in San Francisco court, alleges that it seemed as if IRL was “one of the fastest growing social media apps for Gen Z.” Soft Bank had invested in the startup as it believed that the app would experience “viral growth” as the younger generation was less engaged on Facebook.
Soft Bank bought $125 million in company shares and $25 million from insiders including Abraham Shafi, Noah Shafi, Yassin Aniss, in May 2021.
Late 2022, the U.S. Securities and Exchange Commission (SEC) began investigating IRL. In April 2023, Abraham Shafi was suspended as CEO and in June, the company was dissolved.
Soft Bank reportedly accepted IRL’s inflated number of users and the engagement on its app. Abraham Shafi and his team alleged said that the app had 12 million monthly users which translated to about 25 percent of teens in the U.S., who were under the age of 18. It was supposedly growing 400 percent year over year. A third party assessed the numbers to be much below the number touted by IRL.
In its complaint Soft Bank described the social media platform as a “virtual ghost town, filled with bots deceptively mimicking active human users.”
IRL is not the only startup where Soft Bank seems to have burnt its fingers. The Japanese firm invested millions in FTX as well as WeWork through its Vision Fund. FTX is under bankruptcy filing and its CEO is facing several fraud charges. WeWork is devalued.
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