Investors who used crowdfunding to invest in the failed online agency Emoov are reported as considering legal action to recover their losses.
The basis of any claim seems to be that the investors were misled over the financial state of the company at the time of the crowdfunding round. Earlier this year CEO Russell Quirk forecast 550% revenue growth by 2019 and that the business would return a profit by 2020-21. A flotation had also been suggested.
However, it seems some investors now believe the company was running out of cash at the time of the invitation to invest.
It is even reported that investors are considering setting up a crowdfunding campaign to finance their legal action.
As we reported in this Prime article, Emoov proved to be highly adept at using the crowdfunding model to raise investment. An initial round using Crowdcube raised $3.2m in 2014, with a further seed round and equity crowdfunding raising £1.5m and £2.6m respectively in 2015. £9m was raised in 2017 before £1.9m – from an initial target of £1m – was raised this summer.
These events certainly open up a question about crowdfunding in property or indeed any other venture. Some will say that crowdfunding is supposed to be a high risk, potentially high return adventure. Others will say that investors are entitled to a clear and accurate picture of the financial state of a business in any case.
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