Crowdfunding, which allows smaller private
companies to sell directly to investors, has recently come under fire in
Massachusetts. Secretary of State William Galvin has filed fraud charges
against two out-of-state oil and gas operations relative to their sale of
unregistered securities to investors in Massachusetts.
In
the first instance, Prodigy Oil and Gas LLC allegedly employed a cold-caller
who had been found gulty of theft. Prodigy sold at least $464,000 in unregistered
securities to one Massachusetts investor. In the second case, Synergy Oil LLC
of Oklahoma allegedly sold $35,000 of unregistered securities to two investors.
Through the JOBS Act, signed into law April 5, 2012, small business and entrepreneurs will be able to sell equity (up to $1,000,000 annually) directly to investors to finance their business venture. Crowdfunding is technically not legal yet. Once it is allowed, it must occur on SEC- registered websites. The SEC has until 2014 to adopt rules relative to crowdfunding.
Would-be investors should heed the warning that Crowdfunding is not yet legal or regulated. Proceed at your peril.
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