How Crowdfunding Can Go Wrong
In our previous posts on exempt offerings and crowdfunding, we looked at some new and old ways for start-ups and emerging businesses to raise capital without going through the onerous process of registration. With the Securities and Exchange Commission (the “SEC”) still in the rulemaking process for the crowdfunding provision of the JOBS Act, we also mentioned intrastate crowdfunding as an option, though it might be limited to businesses that are more local in nature, or businesses located in states with a sufficiently large number of accredited investors that could financially support an investment. Instead, many global-minded businesses seem to have turned to crowdfunding sites abroad in search of funding. Eureeca Capital SPC (“Eureeca”), incorporated in the Cayman Islands, was one such site that operated an online equity crowdfunding platform (www.eureeca.com). With the SEC’s order instituting public administrative and cease-and-desist proceedings in November 2014, however, Eureeca quickly became the latest cautionary tale on how not to do an exempt offering. In our next post, we will find out what went wrong and lessons learned.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
So-Eun Lee – So-Eun Lee is an associate attorney in the New York office of The R. Shawn McBride Law Office, P.L.L.C. She concentrates her practice on business law. So-Eun can be contacted at: (347) 921-0173 or email@example.com. Her profile is available on www.mcbrideattorneys.com.
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: (214) 418-0258; firstname.lastname@example.org, or www.mcbrideattorneys.com.
 See generally In the Matter of Eureeca Capital SPC, SEC Administrative Proceeding File No. 3-16265 (Nov. 10, 2014), http://www.sec.gov/litigation/admin/2014/33-9678.pdf.