Santa Clara Man Charged with Running Investment Scam

A federal complaint unsealed today accuses a Santa Clara resident of fraudulently obtaining millions of dollars in VC funding for an artificial intelligence company.

According to United States Attorney David L. Anderson and Federal Bureau Investigation Special Agent in Charge John L. Bennett, 49-year-old defendant Shaukat Shamim fooled investors by making misleading statements about the startup’s technology and revenue.

Shamim stands accused of one count of securities fraud and one count of wire fraud.

“Silicon Valley is a global leader when it comes to ingenuity and entrepreneurship,” Anderson said in a statement sent to reporters Monday. “Fraud is neither ingenuity nor entrepreneurship. We are committed to protecting the valley’s innovation leaders from fraudulent investment schemes.”

“The FBI will not allow deceit, corporate greed, and federal criminal activity to run rampant in Silicon Valley,” Bennett added. “This scheme allegedly falsified revenue and faked clients to swindle investors of over $17 million.”

According to the complaint, Shamim raised more than $17 million for his startup, Youplus, in 2013 by lying about the number of clients who bought the software.

In August of 2019, prosecutors say the defendant showed investors a fake bank statement suggesting that Youplus had $600,000 in revenue from 35 different client companies, including Coca-Cola, Kraft and Netflix. In reality, he had just $65,000 in revenue.

The complaint also accuses Shamim of spending investor funds on personal items, including luxury clothing, eyewear and products from duty-free stores.

Shamim also allegedly told investors that Youplus boasted proprietary AI software that could analyze video reviews by customers talking about certain products, pitched it as the “world’s first Video Opinion Search engine.”

Investors were allegedly told that the Youplus software worked “similar to how Google is indexing the textual web by looking inside and indexing keywords … using computer vision, audio, and text analysis to look inside videos” to understand market trends.

According to the complaint, though, Youplus had not developed any such technology.

Instead, prosecutors say the company suggested was paying workers through its corporate offices in India to watch videos and record their impressions.

“In other words,” according to the announcement today, “the market analysis Youplus was producing was the result of human intelligence, rather than AI software.”

Shamim was served with a summons today in Santa Clara, ordering him to appear in federal court on Tuesday in San Francisco.

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