SoftBank-Backed IRL Shuts Down After CEO Misconduct Probe; Admits 95% Of Users Are Bots

Social messaging app IRL is shutting down following allegations of misconduct against its co-founder Abraham Shafi. A subsequent probe found that the majority of the app's users were bots.

A spokesperson for the startup revealed that an investigation found that 95% of the app's users were "automated or from bots," The Information reported. "Based on these findings, a majority of shareholders concluded that the company's going forward prospects are unsustainable."

The spokesperson confirmed the startup was shutting down and returning the capital it raised.

The outlet previously reported that Shafi was suspended by a special committee of IRL's board of directors late in April after it received a report from an outside counsel regarding his alleged "pattern of misconduct." A person with direct knowledge of the matter said Shafi stepped down as IRL's CEO after that.

The spokesperson did not provide details about the misconduct described in the report and reportedly declined to name the law firm that prepared the report.

The Information also reported late in April a former employee, Nicholas Grant, filed a complaint with the Welsh employment tribunal, alleging IRL retaliated against him and other employees who raised concerns about the accuracy of the app's user count.

The company said in 2021 that it raised more than $200 million in total from investors such as SoftBank, Dragoneer, Floodgate and Founders Fund. The social app claimed it had more than 12 million monthly active users at the time.

Serena Dayal, director at SoftBank Investment Advisers, said the funding giant was "excited to partner with Abraham and the IRL team to support their ambition of helping everyone deepen their connections to friends and family."

IRL reached unicorn status when it was valued at $1.17 billion after its 2021 funding round, according to TechCrunch. The company claimed it has a total of 20 million users, including millions of active monthly users.

Last September, UFC announced its partnership with IRL to allow fans to communicate with their favorite athletes. "This is a massive turning point for IRL as we work alongside one of the world's largest sporting communities to continue building relationships," Shafi said of the partnership.

About three months later, IRL reportedly became the subject of an investigation by the U.S. Securities and Exchange Commission (SEC) to determine if the social unicorn misled investors.

In mid-2022, the company laid off 25% of its workforce, affecting around 25 employees. At the time, Shafi told employees that "courage is a decision, and we will choose courage." He also promised a severance package and career support to affected employees, adding the company will "remain focused on building a product and community that creates more fulfilling human connections for the next generation."

An employee who was not affected by the layoffs told TechCrunch that they "support the move and respect it," adding it "shows a SoftBank company is taking responsibility, usually SoftBank companies get criticized a lot."

Several SoftBank-backed startups have been in the news in recent years over questions related to their business performance and financials.

SoftBank-backed unicorn Byju's, which is the most valuable Indian startup, reportedly implemented layoffs in recent months after India's Enforcement Directorate (ED) raided three of the company's facilities and seized "incriminating" files under the country's anti-money laundering law.

SoftBank CEO and founder Masayoshi Son said in 2020 that his investment in embattled workspace provider WeWork was "foolish" after the startup failed to go public. Just earlier this month, robot pizza startup Zume reportedly shut down operations after raising around $450 million from SoftBank and other investors.