SoMoLend In Hot Water: Allegations Of Securities Fraud From Ohio State Regulators [UPDATE]

Somolend

UPDATE: The city of Cincinnati is suspending its relationship with SoMoLend pending resolution to the case described below. SoMoLend previously had a partnership with the City in order to facilitate loans for local businesses.

Cincinnati.com is reporting that Ohio’s Division of Securities is investigating SoMoLend for fraudulent activity and is threatening to shut the lending-based platform down.

The allegations on behalf of the state include unregistered sales of SoMoLend securities, securities fraud, fraudulent financial projections and making false and misleading statements about past and future performance.

The following are some but not all of the specific allegations from the document:

  • SoMoLend securities were allegedly offered through general solicitation and general advertising in Ohio and other states. (Remember, this isn’t legal until September 23rd of this year under a rule that isn’t even in place yet, Rule 506(c))
  • False and misleading statements were allegedly made in an effort to sell SoMoLend securities
  • The state says that Candace Klein fraudulently increased projections without having a basis for doing so, specifically during a presentation to the Greater Cincinnati Venture Association
  • As of March 7th, 2013, 18 companies had secured loans totalling $234,000 on SoMoLend according to the document. The State alleges that Candace Klein regularly cited numbers far higher than that. In March of 2013 they allege Klein said SoMoLend had raised $15 million for businesses.

Candace Klein has been a vocal advocate of crowdfunding and an active participant in the crowdfunding industry’s efforts to see the JOBS Act through to implementation. She was formerly a co-chair of CFIRA, an organization that lobbies on behalf of crowdfunding intermediaries and industry interests. She is currently listed as a member of the CFIRA portal committee.

We have reached out to Klein for comment and will have more on this story as it develops.

The notice from state securities regulators is posted below and is publicly available on our Scribd page

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  • tstorey

    Rather than taking a “crowd” view here it is best to acknowledge laws regulating the sale of securities in both Ohio and the United States. (I am not a securities lawyer). Unlike anyone in the crowdfunding world, if you actually take 15 minutes of your time to read the document issued by securities regulators you will see the degree to which the entity and it’s management ignored securities law.

    A firm cannot offer securities without a proper license. This firm engaged in the sale of securities without a license on tape at investor presentations and then posted it online providing the Ohio Department of Commerce with evidence.

    The firm met with and remained in correspondence with the Ohio Securities Division from 2011 to today in regards to the group of violations listed above and repeatedly ignored requests to obtain proper licenses to remain within both state and federal laws.

    The firm, while in the process of selling securities without proper license, repeatedly misrepresented their financial prospects to investors. Over a 36 month period, the firm misstated their current and future results prompting the agency to file charges of securities fraud.

    The charges as presented by the Division of Securities represent a patient, well researched investigation that began with meetings with the firm in 2011. When the people who are responsible for enforcing the law repeatedly advise you to take the necessary legal steps to remain within the law and you do not take these steps, you become subject to enforcement outlined in the above document.

    My opinion? If a highway patrolman pulls you over for speeding and issues you a warning to travel at the speed limit? It is best to to do exactly that.

  • Carlsr

    This can’t be right. Anyone in the crowd have more insights?