“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.”
From November 2013 through October 2019, YouPlus raised approximately $17.5 million in seed funding from approximately 50 investors. Of that $17.5 million, about $11 million was raised in 2018 and 2019 from about 30 investors, a mixture of individuals and small funds or institutions.
In particular, one venture fund invested a total of nearly $2 million in YouPlus in 2018 and 2019, including a $600,000 investment in December 2018. Several members of the investment committee of that venture fund also personally invested hundreds of thousands of dollars in YouPlus, the SEC said.
Venture capital firms listed on Pitchbook as having stakes in the company included Elevate Innovation Partners, DN Capital, and The CXO Fund.
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. It 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 announced criminal charges against Shamim.