Start-ups, ‘lies’ & hell in a cell for SA founder

Details of a US case involving SA man read like a film script

● Heated arguments on a Cape Town yacht, a $42.5m (R632m) initial coin offering, a deal cut in a Camps Bay dining room and a prison dorm in New York’s infamous Rikers Island.

It might read like an excerpt from Martin Scorsese’s 2013 film The Wolf of Wall Street, but these are the details that have emerged in a court case in the US involving a South African businessman.

Former Springleap CEO Eran Eyal was last month charged with fraud in New York over allegations that he misrepresented details of his former start-up to steal $600,000 from investors. If convicted he faces up to 15 years in prison.

Eyal was released from Rikers Island on Tuesday, three weeks after he was arrested, after posting bail of $250,000.

Springleap — which Eyal founded in 2008 with entrepreneur Eric Edelstein, who split from the company in 2012 — was a global crowdsourcing company that offered marketing, digital media and platform design services, until Eyal shut it in early 2016.

Eyal this week proclaimed his innocence to local tech site Ventureburn, calling the charges “malicious allegations and rumours”. He said he’d been through “three weeks of hell” in a cell with 50 other prisoners. “Been sleeping next to murderers and rapists,” he added.

He said he would comment soon “on everything”, claiming that most of the allegations “can be disproven with simple Google searches”. He added that Edelstein “has nothing to do with this”.

The charges relate to 2014 and 2015, when the New York attorney general’s office claims Springleap advertised that it had a top management team — including chief technology officers (CTO) — when, in reality, the company had no CTO.

Similarly, Eyal allegedly misrepresented to investors the existence of an advisory board, consisting of well-known businessmen, though no such board ever met.

Eyal allegedly also misled investors by claiming that Springleap had built a community of about 180,000 vetted creative professionals with agency-level experience.

He is further said to have told investors that Springleap had big clients, including a top computer corporation and a multinational semiconductor design company.

Eyal also apparently told investors that Springleap was featured as the seventh-most innovative company in the world by Fast Company magazine — when the company was in fact listed in a subsection of the same 2014 edition, titled “SA’s Top 25 Companies 2014”.

Shopin, the blockchain start-up Eyal founded in 2017, has since replaced him with an interim head, Jennifer Haggerty.

However, it is not clear whether Eyal is still in control of the crypto keys to the company’s online wallet and the $42.5m the company netted through an initial coin offering in September last year. Calls and e-mails to Haggerty and other top Shopin officials this week went unanswered.

Eyal has claimed that Shopin conducted pilots with three top US retailers, including Bed Bath & Beyond.

But this week a spokesperson, Leah Drill, said the company could not find any records indicating it did any pilot or business with Shopin.

It has also emerged that a case was lodged last year against Eyal in India, by Mumbai businessman Rupinder Singh Arora, who alleges he was duped out of $50,000 he invested in Springleap via US-based angel investment group Cross Border Angels.

Arora alleges that the investment group told him big names such as Nestlé, Vodafone and Unilever had invested in Springleap, when there were no other investors.

The case has yet to come to trial, while the two representatives of the angels group are out on bail.

The group’s founder has yet to be traced by police.

In May last year, Swiss investment company Abreziel Holdings took legal action against Eyal and his former business partner

Eyal posted $250k bail this week after three weeks on Rikers Island

Steven Gray, alleging the two had lied in claiming that their start-up Passo had secured an 18-month pilot with US retailer Macy’s. Abreziel Holdings invested $350,000 in Passo.

A settlement was reached last year in which Eyal and Passo repaid $125,000. Gray has since absconded and is being sought to pay back the remainder of the money.

Closer to home, Dairy-Best CEO Duncan Barratt says he lost R8.5m investing in Springleap. Barratt at one time held a 60% stake in the start-up before he parted ways with the company in 2012, following a deal cut in the dining room of his Camps Bay home. He is currently co-operating with US investigators.

He said he and his lawyer had had many heated arguments with Eyal and Edelstein on his yacht in Cape Town.

“We were so gatvol of the lies and deceit,” said Barratt, adding that “he [Eyal] wasn’t coming clean with us on what he was doing with the money”.