The US Securities and Exchange Commission (SEC) has filed a lawsuit against Abraham Shafi, former CEO of the social media company IRL, alleging he orchestrated a $170 million fraud by misleading investors about the company’s growth and concealing his personal expenses.

According to the SEC’s complaint, Shafi inflated the company’s user numbers and revenue, presenting a rosy picture of IRL’s performance to attract investment. He allegedly fabricated user data, creating the illusion of a thriving platform with widespread adoption. The SEC further alleges that Shafi used company funds for personal expenses, including lavish travel and entertainment, without proper authorization or disclosure to investors.

The lawsuit alleges that Shafi’s actions violated federal securities laws by making false and misleading statements to investors. The SEC is seeking to recover the allegedly ill-gotten gains, impose penalties, and permanently bar Shafi from serving as an officer or director of a publicly traded company.

“This case highlights the importance of transparency and truthfulness in the capital markets,” said [Insert Name, SEC Official Title], in a statement. “We will not tolerate executives who mislead investors to enrich themselves at their expense.”

IRL, a social media platform focused on real-world connections, has faced significant challenges in recent years, struggling to gain traction amidst stiff competition from established giants like Facebook and Instagram. The company’s stock price has plummeted since Shafi’s departure, and the lawsuit adds to the platform’s troubles.

Shafi has not yet publicly commented on the SEC’s allegations. This case is currently in its early stages, and it remains to be seen how the legal proceedings will unfold. However, the lawsuit serves as a stark reminder of the importance of due diligence for investors and the consequences of corporate fraud.

This story was originally reported by Joe Miller in the Financial Times.