$63 Million Dollars Magically Stolen at CrowdStreet

[Caroline Gerardo]

CEO steals the money? Your investment in a syndication 100% at risk?

CrowdStreet, a real estate investment platform, was hit with a SEC news report claiming that $63 million in customer cash went missing. The funds were from an office project in Atlanta that was reported in 2022. The claim was due to a securities offering on CrowdStreet by an issuer that eventually went bankrupt. After the story was published, CrowdStreet said it was replacing its chief executive officer.

The property development company raised millions of dollars through crowdfunded offerings to acquire commercial properties is being investigated for fraud as $63 million is now missing, much of it funneled into the accounts of the CEO and related entities. I am not pointing a finger at Tore Steen CEO or Nightingale Properties Elie Schwartz CEO. The problem stems from deregulation.  

Everyone was so jubilant that securities laws loosened up the qualification gates BUT the problem is in the vetting. I questioned "loosey goosey" accreditation standards going back to the 2013 JOBS Act. If you invested in these projects your money is 100% at risk. Will our government step in? Shrugs?

CrowdStreet like others failed to use professional escrow accounts. An escrow account provides a layer of security for investor funds. Instead of the funds going directly to the issuer, they are held in a separate account managed by a neutral third party (the escrow agent). This reduces the risk of misappropriation or misuse of funds. An escrow account is not the cure all, it's just an extra person to say: "no you cannot use that money to buy a Ferrari."

Another important factor in the success of these platforms is the humans who are choosing the investments. Do they have boots on ground actual experience purchasing, managing, and finding tenants for the type and location of the real estate they advertise?

Have you invested in #crowdfunding? How is it going now that rates are eight percent?

#SEC #accredited #investor