The US Securities and Exchange Commission, or SEC, has recently charged a startup developing a machine-learning tool to analyze internet videos, YouPlus. The charges are for defrauding investors by misleading and falsifying statements about finances and revenue sources, according to the SEC. The regulator claimed that this was going on for years, and has also charged Shaukat Shamim, the CEO of YouPlus, with fraud.

Charging Shamim And YouPlus With Fraud

The announcement itself, made on Monday, had the SEC detail how Shamim misrepresented accounts, doing so between the years of 2018 and 2019. Shamim did this when he approached investors, managing to raise funds from these investors and continuing to do this fraud on multiple occasions

The complaint went into detail about how Shamim allegedly lied to investors, claiming that YouPlus was earning millions of dollars in annual revenue. He further claimed that YouPlus held over 100 clients, including companies listed on the Fortune 500. The SEC stated that none of these facts were true, however.

Lies And Deception To Keep The Business Rolling

In a bid to keep the fraud going for longer, Shamim provided falsified bank statements to investors if they pressed him for more details about these claims. Even so, his plans started to fall apart in late 2019, when he found himself confessing to certain investors that YouPlus had only earned $500,000. Further lies were revealed, with Shamim revealing that only four paying customers were obtained since its launch back in 2013, which is a far cry of the incredible numbers he initially claimed.

Erin E. Schneider stands as the director of the SEC’s San Francisco office, and gave a statement about the matter at large. Schneider explained that Shamim and YouPlus gathered interest within the company through the use of false information regarding its customer base and financial performance. Schneider explained that private companies are mandated to be truthful when engaging in early-stage fundraising, should they be selling securities to investors.

Facing An Array Of Charges

The SEC had filed its complaint to the District Court of Northern California. Within it, the regulator charges both Shamim and the startup itself with violation of antifraud provisions made within the federal securities laws. As such, the SEC is seeking civil monetary penalties, disgorgement with prejudgment interest, as well as permanent injunctions and an officer-and-director bar against Shamim himself. Furthermore, Shamim will face criminal charges that will be brought by the US Attorney’s office. These charges will run parallel with the charges of the SEC.