Equity Crowdfunding – Is Fraud Even Possible?

The rest of the world is quite a bit ahead of the United States when it comes to crowdfunding. In the land down-under, the Australian Small Scale Offerings Board (ASSOB) is the leading platform helping companies raise money through equity crowdfunding campaigns.

assobFounded in 2005, the ASSOB has helped more than 140 companies raise more than $135 million for their companies. According to CEO Paul Niederer, there has not been a single instance of fraud. Not one. Why?

According to Paul, the amount of trouble that it takes to get through the due diligence phase of an equity offering, makes it basically impossible (and undesirable) to commit fraud. Even without a complex regulatory regime in Australia, there is a great deal of pressure on the platforms (like ASSOB), the sponsors (think investment bankers), and the lawyers and accountants. They really, really need to get it “right”, if for nothing else, for their own reputations. In short, the power of the crowd is the power to ensure that ancillary service providers and crowdfunding platforms thoroughly vet listed companies.

Jonathan Sandlund at The Crowd Cafe did an excellent interview with Paul, which is available here. If you want to learn more about the lessons learned in Australia, take the time to watch it.

I would be remiss if I didn’t share an endorsement of our Equity Crowdfunding book from Paul. It is really great to get a compliment from a successful pioneer that has shared experiences and lessons with all us Yankees as we gear up for the nationwide legalization of crowdfunding.

paul“Your book was a really interesting read and it was luckily devoid of too much about the Jobs Act and the SEC etc. Instead there is practical advice about how to turn ‘customers into loyal owners’ through Equity Crowdfunding. I loved the turn of phrase you used that ‘the investors are needed to make this business a success’ which is at the heart of your book and elaborated page after page. Good job!”. 

– Paul Niederer

Jonathan Frutkin
Jonathan Frutkin is CEO of Cricca Funding, LLC. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.

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