San Francisco: Japanese investment giant SoftBank is suing social app IRL for fraud related to fake user base and growth, asking $150 million in damages.
In May 2021, SoftBank paid $150 million to purchase IRL shares based on IRL’s valuation at $1 billion. In its lawsuit, SoftBank said that IRL CEO Abraham Shafi had claimed that his mobile app had been downloaded by 25 per cent of US teens under 18 years old and IRL had 12 million monthly active users, growing at a “meteoric” 400 per cent year-over-year rate.
Additionally, IRL reported strong user engagement and retention metrics, which showed that nearly 30 per cent of its MAUs were using the platform on a daily basis. However, these metrics were accurate, according to SoftBank.
According to the lawsuit, IRL spent tens of thousands of dollars on proxy services to fraudulently inflate IRL’s user data with bots.
“Upon information and belief, IRL did not actually have 12 million MAUs during the period when SoftBank conducted diligence for its investment in April and May of 2021. Nor had 25 per cent of teenagers under 18 years old downloaded IRL’s mobile app,” the lawsuit claimed.
To the contrary, “the social app spent substantially more than $50,000 per month to acquire each actual, monetisable user,” and despite explicitly telling SoftBank that “no (IRL) Active User was generated by any click farm or similar service, bot, automated programme or similar device,” on information and belief the vast majority of IRL supposed “active users actually were bots”.
IRL is also being probed by the YS Securities and Exchange Commission (SEC) to determine whether the app violated security laws by misleading investors.
–IANS