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SA tech entrepreneur facing US charges in $600k fraud scheme

Aug 30 2018 09:25
Fin24

South African tech entrepreneur Eran Eyal, former CEO of Springleap and founder of Shopin, is facing fraud charges in the US over allegedly soliciting investors through false representations.

And while he's been accused of stealing $600 000 from investors, a much larger amount could be involved, US authorities have said. Eyal founded a number of tech companies in South Africa, and worked for a time as a technology radio journalist before moving to the US. 

A release from New York Attorney General Barbara Underwood announced a felony indictment charging Eyal with fraud for allegedly getting $600 000 from investors by convincing them to purchase convertible notes through misrepresenting Springleap's management team, advisory board, creative professionals and clients.

Eyal was also charged with computer crimes for allegedly hiring a computer hacker to webscrape a database of creative professionals. If convicted, he faces up to 5 – 15 years in prison.

"As we allege, this massive securities fraud scheme bilked investors out of hundreds of thousands of dollars," Underwood said.

Could involve up to $1.3m

While the indictment filed pertains to four investors who invested over $600 000 in Springleap and never received their money back, the Attorney General's investigation identified additional investors in Australia, South Africa and the United Kingdom who invested a total of over $1.3m in the company, she added.

She vowed to "do what it takes to root out and prosecute securities fraud".

Speaking to Fin24, one of the South African investors, who did not wish to be named, spoke of the investors being "duped to the tune of R8m" (around $600 000). Investors had walked away from Eyal's initiatives "licking [their] wounds and very much poorer", the investor said.

Springleap was a purported global crowdsourcing company offering marketing, digital media, and platform design services.

According to statements from the prosecutor, between 2014 and 2015, Eyal allegedly attracted investors to Springleap by making false representations, advertising that it had a prestigious management team including Chief Technology Officers with "impressive" biographies. The company did not have a CTO, Underwood's statement contends.

"While the names of the fabricated CTOs in the investment materials belonged to real individuals, Eyal allegedly inflated their credentials to state that they were previously CTOs at major companies before joining Springleap, in order to claim that high-profile executives were part of Springleap’s management team.

"Similarly, Eyal allegedly misrepresented to the investors the existence of an Advisory Board, consisting of well-known successful and respected businessmen – though no such Board ever met."

Fin24 reached out to Eyal for comment, who had not responded by the time of publication.

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springleap  |  eran eyal  |  fraud  |  investment  |  silicon valley
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