A few weeks ago I posted about the potential legal liability of funding portals. Lo and behold, on September 20, 2021 the SEC brought an enforcement action against an issuer and its principals, and also against the funding portal, TruCrowd, Inc., dba Fundanna, and its owner, Vincent Petrescu.
Here’s a link to the Complaint. If you take the Complaint at face value – and readers should bear in mind that there are least two sides to every story – this is a lesson in how a funding portal can get into hot water with a questionable issuer.
The allegations against the issuer and its principals are straightforward: they failed to disclose the criminal record of one of the principals; they used investor money for personal purposes; they misled investors about a purported real estate project.
More interesting for our purposes are the allegations against the funding portal and its owner. Calling TruCrowd and Mr. Petrescu “gatekeepers,” the SEC alleges, among other things, that:
- TruCrowd and Mr. Petrescu allowed the offerings to proceed despite multiple warning signs of possible fraud or other harm to investors.
- Mr. Petrescu participated in drafting the inaccurate Form C and offering statement.
- TruCrowd and Mr. Petrescu failed to order a “bad actor” check.
- Mr. Petrescu ignored warning from a securities lawyer.
It’s hard to walk away from a big commission. But this enforcement action illustrates that sometimes you have to.