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Delivering All Things Crowdfunding and Online Investing

July 26, 2016 by Andrew Hanks
Read CrowdCheck General Counsel Huiwen Leo's article featured on Locavesting!
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May 23, 2016 by Andrew Stephenson
As we have previously discussed, the Regulation CF disclosure requirement for the financial condition of the issuer has the potential to get inexperienced companies in trouble. It is in this section of the disclosure that optimistic entrepreneurs may provide misleading information by not providing the full details of performance measurements, or by not including information on the assumptions underlying any financial projections. Such statements may be misleading in their own right, or may omit information necessary to make the provided information not misleading – also known as securities fraud (see paragraph (c)). As we have also previously discussed,...
This entry is filed under Crowdfunding, Disclosure, Fraud, Offering materials, SEC, Blog
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July 08, 2015 by Andrew Stephenson
Online investment platforms and the EB-5 Visa investment community have been abuzz lately following the June 23 announcement by the SEC that is has issued a final order against Ireeco, LLC and Ireeco Limited for acting as unregistered brokers in violation of Section 15(b) of the Securities Exchange Act.  The practices by Ireeco, LLC included the establishment of an online portal that assisted foreign investors with selecting EB-5 Regional Centers and investment projects that suited the investor's interests.  Ireeco was then paid a fixed amount of the administrative fee typically charged to EB-5 investors by the Regional Center when the investor made his or her...
This entry is filed under Bad Actor, Failure, Fraud, Offerings: EB5, SEC, Securities Law, Blog
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January 15, 2015 by Sara Hanks
Well that didn’t take long. You know those Nigerian scams where someone emails you and asks you to help him spirit millions of dollars out the country, except you have to front him the bank fees? Well, it’s turned up in crowdfunding. We are aware of a couple of instances like this: Company posts its offering on a crowdfunding site. Investor who claims to be a money manager contacts company for details.  The investor may come from a respectable country where a lot of money managers are based, and it may have an online presence that seems to check out. Anti-money laundering and sanctions checks may come back negative. But then the investor raises an issue. It...
This entry is filed under Due Diligence, Fraud, Blog
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December 12, 2014 by Andrew Hanks
This entry is filed under Crowdfunding, Due Diligence, Fraud, In The News, Blog
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October 31, 2014 by Andrew Stephenson
Securities laws in the United States are based around the idea of disclosure and protection of the naïve investor from unscrupulous practices by issuers of securities —  the sophisticated guys duping the little guy.  However, for many early-stage companies, the sophisticated guys at the table are the investors.  Not only do they hold all the cards on the terms of the deal, they know exactly what type of recourse they have if things do not work out the way they would like. Take the rules surrounding securities fraud.  To succeed in a securities fraud claim the investor must show that the issuer made a misstatement of a material fact, or omitted information...
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August 29, 2014 by Sara Hanks
Wait, what? You thought intrastate offerings were exempt from federal securities law? Only bits of it. The "intrastate exemption" for offerings made within a specific state is only an exemption from the laws that govern registration with the SEC. There is NEVER any exemption from the antifraud laws. If you use the "jurisdictional means" (eg telephones or the intertubes, even behind a firewall) then any offer or sale of securities is subject to the federal securities antifraud laws (as well as the state laws, which can sometimes be a lot stricter). And as we've discussed in the past, "fraud" in securities law land is a lot broader than running away with the...
This entry is filed under Crowdfunding, Fraud, Securities Law, Blog
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July 16, 2014 by Andrew Hanks   THE STATE OF JOBS ACT CROWDFUNDING AND WHAT ENTREPRENEURS NEED TO KNOW   Equity and debt-based crowdfunding in the U.S. is partially up and running. President Obama signed the Jumpstart our Business Startups (JOBS) Act in April 2012, but the Securities and Exchange Commission (SEC) has not fully implemented all of its provisions. While many entrepreneurs and members of the crowdfunding community await final regulations governing Title III of the JOBS Act, which allows non-accredited investors to participate in crowd investing, an increasing number of entrepreneurs and businesses are benefitting from Title II crowdfunding (accredited...
This entry is filed under Crowdfunding, Fraud, In The News, SEC, Blog
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May 23, 2014 by Sara Hanks
How’s that for a title for a senior thesis at a liberal arts college? Point is, though, that there is no crowd in crowdfunding. There’s not one crowd but many crowds, and whether securities crowdfunding is going to work as expected depends which crowd shows up on any given day. Advocates of securities crowdfunding long argued that the wisdom of the crowd would expose and prevent fraud. We don’t think that always works; the most notorious exposures of fraud in donation/rewards campaigns so far have been effected by journalists, not the crowd, and as we’ve pointed out for a long time, misleading statements or false promises are also “fraud” and we are seeing the...
This entry is filed under Crowdfunding, Fraud, Blog
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May 05, 2014 by Andrew Stephenson
As many in the crowdfunding space are now well aware, the Washington State Attorney General has brought a case against the sponsors of the Asylum Playing Card Kickstarter campaign.  The lawsuit alleges the campaign made misrepresentations to project backers that constitute "unfair or deceptive acts in trade or commerce".  The basic facts alleged by the state are that Altius Management, a Nashville, TN based company, raised $25,146 from 810 project backers through a Kickstarter campaign for its Asylum Playing Cards that closed on October 31, 2012.  The campaign indicated that delivery of the playing cards was estimated to be around December 2012.  The Attorney...
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