There has been a lot of talk about Washington, DC-based real estate crowdfunding platform, Fundrise, in the media recently. This news mainly surrounds a recent SEC filing gone public that reports the termination of Fundrise’s mortgage REIT’s CFO and treasurer, Michael McCord, who allegedly tried to extort over $1 million from the platform.
CEO Ben Miller will be filling in for McCord until a replacement is found. According to TechCrunch, McCord is denying the allegations being made against him, and says that any discrepancy comes from two ‘inappropriate’ Fundrise deals. So far, it is unclear exactly what happened, but Fundrise is taking the protection of its platform and investors seriously. After these allegations were made, Fundrise fired a third party financial audit firm to look into things.
Fundrise opened up the world’s first eREIT in 2015, after Regulation A+ was passed. This new investment opportunity was praised for its $1,000 minimum investments and low fees that help investors get more out of their real estate investments. Others have claimed that Fundrise is over exaggerating on some points and ‘cherry-picking’ numbers to display on their website in a way that is misleading to smaller investors.
Since Fundrise launched their eREIT it has been experiencing very high demand, and has been known to open up for brief periods before closing again.
To date, Fundrise has raised more than $40 million over the course of five funding rounds that spanned from January 2011 to September 2014. They are known for believing that ordinary people should be able to invest in the real estate around them. A few of their notable investors include RenRen Inc., Camber Creek and Westmill Capital.
One thing is for sure, investors and the media are looking forward to future developments surrounding McCord and these allegations. Security and transparency are big issues when it comes to crowdfunding, especially when it comes to large investments, equity, and unaccredited investors. Fundrise will have to act fast and bounce back if they want to maintain investors’ confidence and make sure that they continue to trust them with their investments.
