Crowdfunding offers the ability for early-stage companies to seek investments from friends and neighbors in their social networks, fellow alumni, and others who have similar affinities. These connections may help reduce fraud that comes in the form of outright theft from investors. But selling securities creates potential for fraud liability in less sinister scenarios as well.
When the Securities and Exchange Commission thinks about fraud, it is not just thinking about someone creating a fake company selling fake goods and running away to Brazil with your grandmother’s investment. A lot of less obviously outrageous behavior looks like securities fraud to the SEC.
In securities world, it is fraud if you knowingly make an untrue statement of a material fact in connection with the purchase or sale of a security and that leads to a loss.
Read more at the CrowdCheck blog