Crowdcube’s due diligence has come under the spotlight following a Financial Ombudsman Service complaint, but how have the peer-to-peer lending projects it supported fared?
The crowdfunding platform has been ordered to repay a retail investor their £18,000 stake in collapsed Chinese take away start-up Zing Zing.
It raised £2.7m in two rounds of fundraising but went into liquidation last year.
The unnamed investor placed a £18,000 stake in Zing Zing’s second fundraising round in December 2017. The Crowdcube pitch stated that the company was raising finance for further expansion. However, the investor later found it wouldn’t be opening the new sites and requested to buy his shares back but was declined.
Ombudsman Ben Waites said Crowdcube did not tell prospective investors that it knew the company’s expansion plans were unsubstantiated and should pay the investor, named Mr S in this case.
The issue has raised an interesting debate about how much responsibility crowdfunding platforms such as Crowdcube should take for projects on their platform.
Businesses raising funds are often startups or in their early years so there is always a risk of losing money, as with any investment.
The platform has been used by several P2P lenders to raise funds.
Here is where they are now.
The peer-to-peer property lender launched a £250,000 crowdfunding campaign on Crowdcube in 2018.
It was looking to raise funds to finance technological development and to gain regulatory approval.
The platform withdrew from Financial Conduct Authority regulation for P2P lending amid the pandemic in May 2020 and is now offering bonds.
In September 2018, Nebeus launched a £1.1m crowdfunding campaign on Crowdcube.
The cryptocurrency P2P lending platform said it would use the funds to obtain an e-money licence from the City regulator to launch its services to a wider audience.
The platform is still operating but is still in the process of applying for an e-money licence.
Ablrate raised £350,000 on Crowdcube in January 2020.
The asset-backed P2P lender said the funds would be used to help build its blockchain-powered secondary market platform and its broker platform.
Its blockchain-backed secondary market ASMX was launched in October 2020 and has traded more than £7.66m.
European alternative lending marketplace Mintos finished a record crowdfunding round in November 2020, raising €7.2m (£6.4m) from 7,048 investors.
The platform said it would use the funds to secure an investment firm licence so it can operate in other countries and to launch new products such as its own debit card.
It is still awaiting its licence but has introduced stricter transparency and investor suitability rules in preparation.
JustUs’ parent company eMoneyHub raised £1.3m on Crowdcube in March.
eMoneyHub, which owns P2P lending platform JustUs and personal finance comparison site Moneybrain, has raised £1,374,180 from 502 investors.
The Crowdcube campaign was launched after eMoneyHub recently raised £1.2m by utilising the government’s future fund.
Lee Birkett, founder of eMoneyHub, said funds raised will go towards building the JustUs compliance team to launch P2P owner-occupied residential mortgages, called the People’s Mortgage.