Monday, 8 February 2016

The Sun article is highly critical of Crowdcube - what is the FCA response?

Here is the text from THE SUN on line today, WRITTEN BY KELVIN MCKENZIE

In with the wrong crowd

A FEW days ago a claims firm that had raised £850,00 through Crowdcube last year went into administration.
More than a hundred people had invested including one punter putting in £135,000.
I know something about the Crowdcube mob and what I know I find deeply worrying, and so should the FCA and Chancellor George Osborne. It may even be a job for Plod.
The reality is that crowdfunding is sticking two fingers up to regulation and you will suffer. When you meet the Crowdcube people they say they turn away most companies seeking investment.
That’s not because the idea/company is no good but because you and the shareholders of your little business aren’t bringing any or enough money with you. And that’s no good to Crowdcube.
This is how they work.
Supposing you had already raised £150K – through remortgaging the house or through friends – for your toy company and you want another £500K. What Crowdcube do – and it may be true of other crowdfunders – is they put the ask of £650K (which includes the owner’s undisclosed £150K) alongside a description of what the company does and why they want the money.
Then the neat trick. Crowdcube start using the undisclosed £150K to create the impression there is demand for investment.
Every few days or so a fresh “investment” in the toy company of say £10K appears on the site. But it’s not the investor’s money but is made to look like it.
So an investor thinks, “There is money going there I must jump on the bandwagon.” Then they invest their hard-earned money.
This racket should stop immediately. Plus selling A and B shares (they have no power) and inviting £10 investments. It’s not the 3.30 at Fakenham. Be grateful for a statement from Crowdcube

If any of the above is true, where are the FCA?? 

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