The celebrated South African entrepreneur Eran Eyal (43) has been charged for fraud in New York amid a number of shocking allegations.
The US authorities are accusing him of stealing millions of rands from investors, who he allegedly seduced to invest in his company by lying and fraud – including by hiring a computer hacker to create fake information for his platform.
Eyal, who grew up in Durban, is well known in the local start-up scene. After his studies - according to his LinkedIn profile he has BA degree from the University of KwaZulu-Natal, but according to his Facebook profile he studied law at Unisa - he founded Springleap in 2007. The company was initially a t-shirt venture: graphic designers submitted ideas for t-shirts on its website, which were then printed by Springleap.
It quickly expanded into a crowdsourcing website connecting companies with graphic designers and advertising professionals. Nokia, Samsung, Foschini and South African Breweries became clients and the business won the prize for the most innovative ebusiness at the United Nations World Summit.
Four years ago, the company said it secured $400,000 in funding from South African and UK companies and moved to Brooklyn to build out its advertising crowdsourcing business in the US. At the time, Eyal said that the company had a sales pipeline of $3 million. Springleap claimed to have 180,000 advertising creative professionals on its platform, ready to help companies with their campaigns.
He got involved with a number of different businesses in recent years, and resigned from Springleap. Most recently, he founded Shopin - "a decentralised Amazon, built on the blockchain".
This weekend, he was charged for fraud in New York.
In a damning statement, New York Attorney General Barbara Underwood accused Eyal of allegedly stealing $600,000 from investors in a “massive securities fraud scheme”.
It all boils down to the money Springleap raised in 2014 and 2015.
The authorities accuse Eyal of allegedly attracting investors to Springleap through a series of false representations about the company’s management team, advisory board, creative professionals, and client base.
“Springleap allegedly advertised that it had a prestigious management team – including Chief Technology Officers (CTO) with impressive biographies – when, in reality, the company did not have a CTO. 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,” Underwood said
Eyal also allegedly lied about its high-profile clients, and about an advisory board, which supposedly consisted of well-known successful and respected businessmen.
And, about that 180,000 creative professionals on the Springleap platform...
“In reality, Eyal allegedly hired a freelance computer hacker to web-scrape computer data from a legitimate online portfolio website in order to obtain pedigree information for creative professionals to falsely inflate his existing list.”
Eyal allegedly bragged that the “project” had cost him a total of $25, said the authorities, who accessed his emails.
Also, Eyal allegedly lied that Springleap was featured as the tech magazine Fast Company’s 7th most innovative company in the world.
Four investors who invested more than $600,000 (almost R9 million at today's forex rates) in Springleap never received any of their money back. The US authorities say that other investors in Australia, South Africa, and the UK invested a total of over $1.3 million in Springleap.
The UK angel investor Kevin Gaskell, who has a number of investments in South Africa; the South African-registered Colenso Capital; the Australia company Bay Capital and the US-based Clearwater Capital were some of the initial Springleap investors.
If convicted, Eyal faces up to 15 years in prison.
An earlier version of the article referred to Eyal being arrested, which has not been confirmed.
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