Crowdfunding Fraud in Massachusetts? Not so fast.
This syndicated article was written by Walter Frick for Bostinno.com
Between now and whenever the SEC releases its final crowdfunding guidelines, we’re likely to hear a lot more about the potential pitfalls of letting anyone invest in private companies. Just as in the run-up to legalizing crowdfunding, lots of that talk will center around fraud.
So headlines yesterday like Oil companies use ‘crowdfunding’ exception to defraud investors (BBJ) and Crowdfunding takes early hit in Massachusetts (InvestmentNews) got my attention. But, thankfully, these cases aren’t actually warnings about the dangers of crowdfunding at all. In fact, they have almost nothing to do with it.
Here’s how the Massachusetts Secretary of the Commonwealth describes the cases in a release:
Secretary of the Commonwealth William F. Galvin today brought fraud charges against two oil and gas operations in connection with their sales of unregistered securities… In one case, the administrative complaint filed by the Securities Division charged Prodigy Oil and Gas LLC and its principal Shawn Bartholomae of Texas with selling at least $463,768 in unregistered securities to a Massachusetts investor. The other case against Synergy Oil LLC of Oklahoma, Tony Pistilli and Robert Falco, both of California, involves the sale of $35,000 in unregistered securities to two investors.
The short version is that these violations have little to nothing to do with crowdfunding but rather concern the unrelated question of general solicitation. So why did both journalists and the Massachusetts Secretary of State suggest as much? [Continue to full article...]