The crowdfunding platform Crowdcube is facing a slew of investigations by a financial watchdog after a group of investors claimed that it failed to verify a company’s business plans, causing it to lose thousands of pounds.
Sixteen investors have asked the Financial Ombudsman Service to intervene after fast food delivery company Zing Zing, which raised more than £ 650,000 in 2017 on Crowdcube, collapsed in administration in 2020.
The group claims that Zing Zing courted investors with an earlier version of its business plan before reviewing it after the funds were raised, and Crowdcube did not verify this or verify the plans.
The group’s claims come after the Ombudsman previously ruled in favor of an investor, ‘Mr S’, who participated in the Zing Zing funding round and ordered Crowdcube to pay him £ 18,000.
Adam Caplin, who has coordinated the group of investors through WhatsApp, said: “These crowdfunding sites have a duty to take care to ensure that the information they publish is as appropriate, fair and accurate as it should be.
“It’s great for Crowdcube and company founders Darren Westlake and Luke Lang (pictured) to fly the flag and say they had a record fundraiser for a company and collect their fees, but they have a responsibility: they have a responsibility to the investors who use your site. “
One of the group of investors in Zing Zing that City AM spoke with lost £ 17,000 in the funding round.
In its previous ruling on Zing Zing in favor of Mr. S, the Financial Ombudsman Service wrote that Crowdcube clearly knew that Zing Zing’s plans to use the funds were “at an early stage and not supported by evidence. Enough documentaries “, but” Crowdcube did not make (the claimant) aware of this anywhere in the field. “
The firm previously referred to the ombudsman’s ruling in the Mr. S case, saying: “The company’s speech was reviewed in accordance with our Due Diligence Charter and approved as a financial promotion to ensure it was fair, clear and not misleading. Our publicly available Letter outlines the full due diligence performed on each business listed on the platform.
“We have strict due diligence processes in place and we are continually improving the processes we have in place to ensure that we maintain the highest standards for our growing community of investors.”
Crowdcube said it would not comment on the ongoing investigations.