I was thinking of calling this series “Fraud of the Month” but didn’t want to go that far. You may reach your own conclusions as to whether that tag is warranted in any particular instance.
While names and identifying details are changed, this is a true and recent story. Company raised funds in a Reg CF offering on SuperPortal. Company had a pretty lean team, but listed Freddie Finance as its CFO in its Form C. Freddie made no reference to Company in his LinkedIn profile, which was pretty impressive. When contacted, Freddie said he wasn’t the CFO but had given Company a bit of advice on fundraising in the past.
So you can decide for yourself what issues this raises, and for whom, but let’s look at how to avoid this kind of thing.
Lessons for issuers: If you list someone as part of your team, make sure that person does actually perform that function, and is ok with you saying that’s what they do, and is not going to respond “Nope, they are nothing to do with me,” if anyone checks up.
Lesson for portals: Do some elementary cross-checking on team members. If someone is listed as an officer or director, check they have been appointed as such by the issuer. And if their LinkedIn profile doesn’t show them as such, ask why. Additionally, you (or someone on your behalf) will be running Bad Actor checks on officers and directors, so presumably you will be telling those people directly why you are running a check on them. Right?
Lesson for investors: If you are thinking of investing in a company based on the quality of their team, make sure the team is as advertised. If there’s a discrepancy, use the intermediary’s chat function to ask the company what’s up, and treat a non-response as a red flag.
And for everyone: contact us to see how our Bad Actor and proprietary diligence reports can help you avoid these kinds of issues.