SoftBank gave $170m to a social app whose users mostly didn't exist

Back in 2021, Japanese investment giant SoftBank led a little-known social media app called IRL to unicorn status and an overall valuation of $1.17 billion by investing over $170 million. Well, it turned out that the app completely made up its user numbers, admitting that 95 percent of its purported 20 million user base was fake, as originally reported by The Information.

At the time, SoftBank called the app “an innovative event-based social network” that enables “people to do more together.” However, the firm didn’t know that there were no actual people doing more together. There were no people at all, just a gaping maw of bots and automated accounts.

The app marketed itself as an event-organizing alternative to Facebook, aimed toward younger generations that think Mark Zuckerburg’s social network is for squares and old people. Despite the name, IRL quickly pivoted to online events after the pandemic made meeting up in real life nearly impossible.

Problems began mounting almost immediately after nabbing those millions from SoftBank. Last year, the company laid off 25 percent of its team, with founder Abraham Shafi encouraging employees to “adapt” and “be disciplined,” adding that “most people don’t want to be Olympians. In the same way, not everyone will want to walk the path we are walking.”

After that, employees began getting suspicious of Shafi’s claim of 20 million monthly active users. That’s when the SEC stepped in, issuing a probe as to whether or not IRL misled investors. In April of this year, the company’s board of directors suspended Shafi and appointed a new acting CEO.

Thanks to the inflated numbers and half-baked concept, IRL is shutting down and taking its 19 million bots with it. The company says it’s returning capital to shareholders, but nobody knows how much money is left in the coffers. Shafi once said that the company had “more than enough cash to last well into 2024” but he also touted 20 million active users so, you know, grain of salt and all of that.

This has been a tough week for SoftBank. The firm also invested nearly $400 million in a company that manufactures robot pizza makers. The company shuttered and is liquidating its assets, again leaving a giant question mark as to how much SoftBank would recoup from its original investment. That adds up to a potential loss of $500 million in a single week. Don’t worry about SoftBank, however, as the firm owns dozens of technology companies and recently sold Boston Dynamics for a cool billion. It’s still pretty embarrassing though.

This article originally appeared on Engadget at https://ift.tt/a5Wl2RY
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