Editor’s note: This story has been updated to include a statement from Crowdfunder.
A lawsuit filed Wednesday claims Marina del Rey equity crowdfunding startup Crowdfunder Inc. was under investigation as recently as July by the Securities and Exchange Commission.
The suit was filed in Los Angeles Superior Court by former Crowdfunder Chief Operating Officer Douglas Strasnick, who claims he was fired for voicing concerns about the legality of the company’s businesses practices. The complaint alleges the company allows self-accredited investors to view confidential information about deals improperly.
“In an effort to gain an advantage over other crowdfunding companies, Defendant, in clear contravention to SEC regulations, allowed new self-accredited investors to view private and public deals on Crowdfunder platform…” the complaint reads. “Despite his opposition to this practice, Mr. Strasnick was informed by Crowdfunder management that it would not change this practice.”
Both Crowdfunder and Strasnick’s lawyer, Dan Stormer of Stormer Hadsell & Renick in Pasadena, did not immediately respond to request for comment.
Stransick claims in the suit his termination came after he clashed with other senior management – including Crowdfunder’s Chief Executive Chance Barnett and co-founder Rafe Furst – about how to handle the SEC’s probe. The ousted exec also claims the company failed to disclose a loan issued to it by Furst to investors and that Barnett subjected staff to sexual harassment.
Crowdfunder claims to have a network of 130,000 entrepreneurs and investors who use its platform with some $160 million in investment commitments. The company says it’s funded over 100 deals with an average deal size of $1.8 million.
A Crowfdunder spokeswoman emailed the following quote to the Business Journal in response to the lawsuit:
“Crowdfunder has engaged legal counsel to represent us in this matter. We vehemently dispute the allegations and claims made by Douglas Strasnick. The company is committed to complying with all federal, state, and local laws. Crowdfunder was not a target of an SEC investigation. Rather, we were requested to provide information on a company, Tellspec Inc., which was briefly listed on the Crowdfunder platform in 2015. In January 2017, Crowdfunder was informed by the SEC that no enforcement action would be recommended. Further, we deny engaging in any wrongful conduct toward Mr. Strasnick. He was terminated for legitimate business reasons unrelated to any alleged complaints about the SEC inquiry or any workplace misconduct.”
Deals & Dealmakers reporter Henry Meier can be reached at [email protected]. Follow him on Twitter @henry_meier.
