Regulatory Update: SEC’s First Case Involving Regulation Crowdfunding
The SEC filed its first Complaint regarding Reg CF and has charged the Funding Portal, Issuer and related Individuals for fraudulent offerings. The allegations include, among other things, the following:
Related to the Issuer:
fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies;
misuse of offering proceeds and diverting investor funds for personal use rather than using the funds for the purposes disclosed to investors;
false and misleading representations and omissions to investors.
Related to the Funding Portal:
failed to address red flags related to criminal history;
failed to reduce the risk of fraud to investors.
Alleged violations included the following rules and regulations:
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]
Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]
Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and (c)]
Section 17(a) of the Securities Act
Section 4A(a)(5) of the Securities Act and Rules 301(c)(2) Thereunder [15 U.S.C. § 77d–1(a)(5) and 17 C.F.R. 17 C.F.R. § 227.301(c)(2)]
Ref: SEC Compliant – https://www.sec.gov/litigation/complaints/2021/comp-pr2021-182.pdf
SEC Red Flag Resources:
