Washington DC (STL.News) The Securities and Exchange Commission Monday charged a Mountain View, California-based technology start-up and its chief executive officer with defrauding investors by making false and misleading statements about the company’s finances and sources of revenue.
The SEC’s complaint alleges that from 2018 to 2019, Shaukat Shamim, the founder and CEO of YouPlus, a private company that purported to have developed a machine-learning tool to analyze videos on the internet, raised funds from investors while repeatedly misrepresenting the company’s financial condition. According to the complaint, Shamim falsely told investors that 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, Shamim allegedly provided the investor with falsified bank statements in an effort to conceal the fraud. The scheme allegedly unraveled in late 2019 when Shamim confessed to certain investors that YouPlus had in fact earned less than $500,000 and obtained only four paying customers from the company’s inception in 2013.
“As we allege in our complaint, Shamim and YouPlus drummed up interest in the company by providing false information about its financial performance and customer base,” said Erin E. 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 the antifraud provisions of the federal securities laws and seeks permanent injunctions, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Shamim.
In a parallel action, the U.S. Attorney’s Office for the Northern District of California today announced criminal charges against Shamim.
The SEC’s investigation, which is continuing, is being conducted by Mike Foley and Rebecca Lubens, and supervised by Tracy L. Davis and Monique C. Winkler of the San Francisco Regional Office. The litigation against YouPlus and Shamim will be led by John Han and Brent Smyth. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation.