Fraud-Funding: Fake Traction & CrowdFunding

A guest post by Andrew, our newest hire:

It is not uncommon for businesses to use fake profiles to create a sense of traction, growth or interest in their company. The owners of a restaurant could post fake positive reviews online on Yelp or another review site and the consumer may never know. When it comes to potentially investing towards a startup or small business the risk that this fraudulent practice poses escalates much more quickly. In the latest blog for GrowVCTraction: Will You Fake It To Make It? Quintin Adamis outlines some of the dangers of creating fake traction or interest in one’s company to inflate perceptions with respect to the company. Within the crowdfunding realm this practice could potentially harm many small scale investors. It’s not a major problem when you end up paying $15 for a lackluster meal after being fooled by a fake review — the restaurant loses a customer and you move on. But when the potential loss is a few hundred or even thousand dollar investment, the sting may be a bit harder to bear.

So what are the choices for potential crowdfunding investors? They can sift through reviews and social media services that give information about the business and the product it wants to develop. They can email and phone the company and take the company’s word with respect to its legitimacy or even visit its office or place of business, if practical. Even after taking all these steps and sorting through the company’s info and online reviews, it remains hard for the everyday individual to assess whether the company they are interested in supporting is legitimate in every way, and in the world of crowdfunding the everyday individual is the investor!

So as an educated investor you are scouring through portals looking for new investment opportunities in a field that interests you when you come across what looks like a promising start up microbrewery in St. Louis. The two partners who want to expand are both retired professionals and have been brewing home brews for some time to the acclaim of neighbors, friends and the community. They have some transparency already, a good credit score posted, pictures of themselves and their product which they hope to sell on a larger scale and they are looking to raise $30,000 in capital to market and package the beer to leverage the funds they have already saved before they move onto the next phase of the microbrewery. There are tens of reviews online, you’ve made a phone call and talked to the hopeful investee about the project and sent your small investment of $800. But the reviews are fake, the pictures taken on purpose and your investment is long gone.

People may say there are two truths in life, death and taxes, but another remains and that is the fact that whenever there is money to be made people will attempt to exploit the system to their benefit. Fraud is real and potential investors need to do their homework. CrowdCheck is here to do that homework for you. Due diligence and background checks for legitimacy are good for both the business and the investor alike. Our services will let the crowd know that a company we’ve checked is legitimate and that the investment will be put to the purpose they intend. At the same time businesses seeking funds from the crowd will have the assurance that they can attract investors more readily and willingly because they will have an assured check of validity.

While we can’t guarantee your investment will end up making money, and we don’t tell you who to invest in we can help provide you with the information you need to defend yourself from fraud and make informed investment decisions. Which is why, if you decide to become a crowdfunding investor you should look for the CrowdCheck badge.

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