The developer of an artificial intelligence startup in Silicon Valley was sentenced to two and a half years in federal prison, the U.S. Department of Justice announced this week.
Shaukat Shamim, 53, of Santa Clara, pleaded guilty last September to defrauding investors.
According to his plea agreement, Shamim founded YouPlus in 2013, with an idea to develop AI software tools to analyze online video content. Shamim resigned in 2019, but YouPlus had raised about $17 million from investors by that time, prosecutors said.
Shamim admitted to making false representations to investors and potential investors, saying that YouPlus had developed a search engine that used neural networks to analyze videos and predict marketing outcomes, even though he hadn’t actually developed it.
“Instead, to perform pilot projects or marketing studies, YouPlus had employees in India manually review videos — instead of using AI — and then create PowerPoint presentations with marketing insights,” prosecutors said.
Shamim also lied to investors about customers signing up for continuing services and subscriptions, which never happened. Some victims were shown a spreadsheet purporting that 90 customers were paying a total of $600,000 per month.
In February 2019, Shamim told investors that his company had earned $4.6 million in revenue when it had actually earned less than $100,000. That May he told them that YouPlus had earned $3.5 million in the first four months of 2019. The real amount was $280,000.
By the fall of 2019, YouPlus was running short on cash and Shamim sought Series A funding from venture capitalists, prosecutors said. This led Shamim to alter bank statements from both his U.S. and India accounts, showing revenue he never had.
In total, Shamim took in over $6.4 million from investors between August 2018 and October 2019.
In June 2022, Shamim was indicted on three counts of wire fraud and one count of securities fraud. As part of his plea, he pleaded guilty to one count of securities fraud and the rest of the charges were dismissed.
In addition to his federal prison sentence of 30 months, Shamim will have to pay a $50,000 fine and be on probation for three years after his release, the DOJ said.
Currently he is out on bond and is due to report to prison on April 28. The judge will also hold a restitution hearing regarding his case in June.
Katy St. Clair got her start in journalism by working in the classifieds department at the East Bay Express during the height of alt weeklies, then sweet talked her way into becoming staff writer, submissions editor, and music editor. She has been a columnist in the East Bay Express, SF Weekly, and the San Francisco Examiner. Starting in 2015, she begrudgingly scaled the inverted pyramid at dailies such as the Vallejo Times-Herald, The Vacaville Reporter, and the Daily Republic. She has her own independent news site and blog that covers the delightfully dysfunctional town of Vallejo, California, where she also collaborates with the investigative team at Open Vallejo. A passionate advocate for people with developmental disabilities, she serves on both the Board of the Arc of Solano and the Arc of California. She lives in Vallejo.