SAN FRANCISCO: A criminal complaint was unsealed on Monday, July 20 in federal court alleging that Shaukat Shamim fraudulently obtained millions of dollars in venture capital funding for an artificial intelligence company by making false and misleading statements about the company’s technology and its revenue. Shamim is charged in the complaint with one count of securities fraud and one count of wire fraud.
“Silicon Valley is a global leader when it comes to ingenuity and entrepreneurship. Fraud is neither ingenuity nor entrepreneurship. We are committed to protecting the Valley’s innovation leaders from fraudulent investment schemes,” said U.S. Attorney David L. Anderson.
“The FBI will not allow deceit, corporate greed, and federal criminal activity to run rampant in Silicon Valley,” said FBI Special Agent in Charge John F. Bennett. “This scheme allegedly falsified revenue and faked clients to swindle investors of over $17 million.”
According to the complaint, beginning in 2013, Shamim, 49, of Santa Clara, is alleged to have raised over $17 million in funds for his startup company, Youplus. To woo investors, Shamim lied about the number of clients who had purchased Youplus’ software, and about Youplus’ revenue. In particular, Shamim is alleged to have provided investors with a fake bank statement in August of 2019 showing that Youplus had over $600,000 in revenue from 35 different client companies, including Coca-Cola, Kraft, and Netflix, when the true bank statement showed only one client, providing $65,000 in revenue. The complaint also alleges that Shamim used investor funds on personal expenses, including purchases at luxury clothing, eyewear, and duty-free stores.
Shamim also allegedly claimed that Youplus had developed proprietary artificial intelligence software that could interpret video reviews posted by customers of particular products, enabling the companies behind those products to analyze how their brands were trending online. Shamim allegedly pitched Youplus’s software as the “world’s first Video Opinion Search engine,” telling investors that “similar to how Google is indexing the textual web by looking inside and indexing keywords, Youplus is using computer vision, audio, and text analysis to look inside videos” to understand market trends. According to the complaint, though, Youplus had not developed AI that could perform these functions. Instead, a review of the software and the company suggested that Youplus was paying workers through its corporate offices in India to watch videos and record their impressions. In other words, the market analysis Youplus was producing was the result of human intelligence, rather than AI software.