SoftBank Vision Fund II, run by Masayoshi Son, submitted a lawsuit against a previous investment project, alleging great deception by its creators, a family group. IRL, a popular social media company, was appraised at $1 billion and obtained $150 million from SoftBank. The plaintiff has declared that the founders exaggerated user numbers and engagement.
SoftBank's Vision Fund filed a legal claim against the founders of one of its portfolio firms on Monday, accusing them of fabricating user metrics, misleading the fund about performance, and taking millions of dollars unlawfully.Buzzy social media startup IRL was released in April 2021 with the, as the complaint in San Francisco federal court claims, "one of the quickest increasing social media applications for Generation Z."related investing newsAppaloosa's billionaire manager David Tepper knows how to skillfully maneuver through market crisesYun Li3 hours agoOakmark Funds' Bill Nygren is one of the top value managers with double-digit returns — for decadesYun Li2 days agoSoftBank was interested in investing in IRL due to its seemingly low cost and "strong" user activity which made it "well positioned for further viral growth" similar to the pattern of Facebook and Twitter.In May 2021, a month after the company launched, SoftBank committed $150 million to IRL through one of its high-spending Vision Funds, buying $125 million in shares from the firm and another $25 million from insiders including CEO Abraham Shafi and also Noah Shafi and Yassin Aniss, as stated in the complaint.SoftBank believed IRL had 12 million monthly active users.However, this allegation was false, as the complaint charges. IRL was secretly using an army of bots on its own platform, as per the complaint, creating a false showcase of an active social network which was actually a cover up to "cheat investors."The matter started to unravel when the United States Security and Exchange Commission began an investigation into IRL in late 2022. Abraham Shafi was suspended as CEO in April 2023, and the company was dissolved in June.The lawsuit heightens the issues regarding the amount of inspection that SoftBank applied to its portfolio companies. When a third-party estimation of user numbers came in considerably lower than the ones IRL provided, SoftBank representatives accepted Abraham Shafi's explanations that they were "definitely not accurate," according to the case.Past mistakes from SoftBank comprise large investments in supposedly fraudulent crypto exchange FTX and devalued property company WeWork. SoftBank's Vision Funds have greatly suffered since the market peaks of 2021, and the conglomerate reported a full-year loss of $32 billion for the fiscal year ending March 31, 2023.
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