SA tech entrepreneur Eran Eyal convicted of multimillion-dollar fraud in US

14 December 2019 - 12:59 By Stephen Timm
SA tech entrepreneur Eran Eyal has been convicted in a New York court of defrauding investors of millions of dollars.
SA tech entrepreneur Eran Eyal has been convicted in a New York court of defrauding investors of millions of dollars.
Image: Facebook.

A SA businessman has been convicted in a New York court of defrauding investors of millions of dollars through three investment schemes, including a $42.5m (R615m) initial coin offering (ICO).

Eran Eyal, 44, the founder of Springleap and Shopin, pleaded guilty this week to all three schemes after he was initially charged in August 2018 with stealing $600,000 from investors.

The former Capetonian, who moved to New York in 2014, was not jailed but as part of the plea agreement he has to refund the $600,000 to the four Springleap investors he defrauded.

He has also had to step down as CEO of retail blockchain start-up Shopin and has been banned from raising capital or serving in any position of authority in any New York business for three years.

Eyal will be back in court in February after the US Securities Exchange Commission (SEC) added new charges after the plea deal on Thursday. The SEC wants to recover all of the ICO’s $42.5m and bar him for life from holding any management role in a US entity.

The SEC alleges he ran a fraudulent unregistered securities offering and that he spent $500,000 of investor funds on rent, shopping, entertainment and a dating service. But investigators have only been able to find $450,000 of the $42.5m, and he has been ordered to return that amount to investors.

Eyal launched a company called Springleap while living in Sea Point between 2010 and 2014, and after moving to New York he convinced investors it was a tech start-up on the verge of transforming the advertising and marketing industries by crowdsourcing, using social media and its own online platform.

He claimed Springleap had a network of more than 300,000 community members and 180,000 vetted creative professionals with agency-level experience. He also misled investors to believe that the company had a prestigious management team and did business with large companies, such as Google and Coca-Cola.

He hired freelancers from cheap, online marketplaces such as Fiverr in an attempt to flood Springleap’s social network with artificial likes and employed a hacker to steal the profiles of thousands of creative professionals.

Investor funds were placed in corporate accounts that he controlled. He used the money to finance a lifestyle that included a two-bedroom apartment in the trendy Brooklyn neighbourhood of Williamsburg, a personal trainer and holidays in Antigua and Paris.

After Springleap’s funds were depleted in January 2016, Eyal became CEO of another start-up, Passo. By June 2016, Passo had also run out of money.

He then founded Shopin and forced investors to transfer their equity to it at a fraction of the value of their initial investments.

Following this, he solicited millions of dollars in investments through a 2018 ICO by falsely claiming Shopin had conducted pilots with major retailers Bed Bath & Beyond and Ermenegildo Zegna. Shopin investments were then transferred to his personal bank accounts.

When contacted by TimesLIVE, Eyal said: “I cannot give any comment at this time.”