- The Securities and Exchange Commission (SEC) on Tuesday charged YouPlus, a Mountain View, California-based technology startup and its CEO with defrauding investors by making false and misleading statements about the company's finances and sources of revenue.
- YouPlus, a private company, claims to have developed a machine-learning tool to analyze videos on the internet.
- From 2018 to 2019, Shaukat Shamim, founder and CEO, raised funds from investors while repeatedly misrepresenting the company's financial condition, the SEC alleges.
According to the complaint, Shamim told investors YouPlus earned millions of dollars in annual revenue and had more than 100 customers, including Fortune 500 companies. When one investor pressed Shamim for information substantiating those claims, the CEO allegedly provided the investor with falsified bank statements.
The scheme unraveled in late 2019, the SEC alleges, when Shamim confessed to certain investors YouPlus had earned less than $500,000 and obtained only four paying customers since the company’s 2013 inception.
"Shamim and YouPlus drummed up interest in the company by providing false information about its financial performance and customer base," said Erin Schneider, director of the SEC's San Francisco Regional Office. "Private companies engaged in early-stage fundraising must tell the truth when selling securities to investors."
The SEC's complaint, filed in the U.S. District Court for the Northern District of California, charges YouPlus and Shamim with violating antifraud provisions of federal securities laws and seeks permanent injunctions, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Shamim.