Crowdfunding has obtained substantial interest in the U.S., enabling entrepreneurs to raise startup capital in exchange for equity in their ventures. This strategy to equity capital can open up new sources of enterprise finance to valid entrepreneurs, but little attention has been given to the way that it offers new chances for illegal entrepreneurs to defraud investors.
We adopt a forensic strategy to examine entrepreneurs who establish Ponzi ventures--companies that consistently bring in new investors in order to use their money to pay earlier investors returns --to show the ease, creativity, and audacity with which these prohibited entrepreneurs operate. The provided examples of Ponzi entrepreneurs demonstrate how readily they could circumvent the safeguards purported to protect investors: screening by 'the crowd,' documentation and transparency requirements, independent audit reports and withholding of funds until the fiscal target of the enterprise has been met. In this article, we offer potential alternatives to help protect valid entrepreneurs investors, and business in general from the damage made by illegal entrepreneurs.
PUBLICATION DATE: January 15, 2016 PRODUCT #: BH715-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
Related Case Solutions & Analyses:
VF Corp: Acquiring the Iconic Skateboard Footwear Brand Vans
The International Finance Corporations Grassroots Business Initiative
Refinancing of Shanghai General Motors (A)
Business Research Corp. (B)
Project Sun Devil and Project Paris
Company Valuation
Enron Explained
Metro do Porto: An Interest Rate Swap
Asahi India Glass Limited: Leverage, A Double-edged Sword
Jos. A. Bank Clothiers, Inc.: The Men’s Wearhouse Bid
