What is the five-letter word sure to strike fear into the hearts of investors everywhere? Fraud.
But what I can’t understand is why this particular f-word keeps being associated with equity crowdfunding. Sure, the involvement of large crowds statistically does increase the probability of a fraud in any industry. The National Retail Federation> for example, reports that 4.6 percent of holiday returns are fraudulent and cost retailers billions of dollars every year; an estimated $8.9 billion to return fraud will be lost by the retailers this year alone. Another example with rather limited number of people involved: a hedge fund industry with its non-transparent investment vehicles — one of which happened to be managed by Bernie Madoff.