Mountain AI startup's founder Shaukat Shamim accused of $17M fraud scheme

Federal law enforcement and securities regulators have accused the founder of a Mountain View-based startup of raising $17 million in funding under false pretenses.

Shaukat Shamim, 49, of Santa Clara was ordered to appear in federal court in San Francisco on Tuesday to answer charges that he made false statements about the technology and revenue of Youplus Inc. while wooing investors.

He faces charges of wire fraud and securities brought by the U.S. Attorney's office and parallel securities charges brought by the Securities and Exchange Commission.

The U.S. Attorney and FBI allege that Shamim lied about how many clients purchased Youplus’ software, as well as about its revenue.

In one instance last August, they say Shamim provided investors with a fake bank statement showing that Youplus had over $600,000 in revenue from 35 different client companies, including Coca-Cola, Kraft and Netflix. In reality, they say a real bank statement showed only one client and $65,000 in revenue.

Shamim is also accused of using investor funds for personal expenses, including purchases at luxury clothing, eyewear and duty-free stores.

The SEC says that Shamim's scheme unraveled late last year when he allegedly confessed to some investors that YouPlus had in fact earned less than $500,000 and had won only four paying customers in its entire history.

The U.S. Attorney alleges that Shamim boasted of having developed AI that could tell companies how their brands were trending online by analyzing video reviews posted on public websites. He allegedly called it the “world’s first Video Opinion Search engine”  and said 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.

The complaint alleges that instead of using AI, Youplus paid workers in India to watch videos and record their impressions.

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The SEC is seeking permanent injunctions, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Shamim.

He could also face up to 20 years’ imprisonment, a fine of $250,000 and restitution if convicted of the wire fraud charges against him, as well as up to 20 years’ imprisonment, a fine of $5 million and restitution on the securities charges.

“Silicon Valley is a global leader when it comes to ingenuity and entrepreneurship," U.S. Attorney David L. Anderson said in the announcement of the charges. "Fraud is neither ingenuity nor entrepreneurship. We are committed to protecting the valley’s innovation leaders from fraudulent investment schemes."