iFunding, a real estate crowdfunding platform, is insolvent according to several sources.
In recent days, information has cropped up that investors have been left holding the remains of the company that included properties with an estimated value of $20 million. One individual estimated the number of impacted investors at 400 individuals. These Investors are now looking at options to salvage what they can from the crowdfunding platform.
Crowdfund Insider has been told the SEC did issue a subpoena at some point regarding the operational questions regarding iFunding. Specific details have not been made available but one individual suggested it had to do with the platform operating as a Broker Dealer without having the appropriate license.
In early 2016, a law firm was engaged in an attempt to restructure the company but challenges persisted. Former CEO William Skelley departed the platform near the end of 2016 as the operational problems became critical. Allegedly, Skelley was informed that authorities would shut down the platform if he did not resign from the company.
Following his departure a consultant operated the platform for a brief period of time and then several of the main investors as they attempted to reanimate the struggling platform.
No new deals have been originated since late 2016.
Reportedly there were issues with the corporate structure of iFunding (or Innovational Funding). The company utilized a Delaware Series LLC with iFunding being the Master LLC. Once iFunding encountered financial difficulties it was not clear what would happen to the sub LLCs that held the property investments. As this was uncovered, the law firm that was engaged last year subsequently structured later deals as individual LLCs. The same law firm is said to be cooperating with the SEC to work things out as best they can.
One of the larger investors, a group called Jazco Propety Management, LLC, has stepped up to manage the remaining properties to the benefit of all investors.
Jazco management is aware of the potential for a problematic scenario of a potential trip to bankruptcy court. Jazco has reached out to all remaining investors to seek a consensus on a restructuring of the firm. Crowdfund Insider spoke with a representative of Jazco, Harrison Zipper, who provided a comment on the iFunding saga;
“In my opinion, iFunding was a viable company that was not run in a business like manner. Prior management had not implemented proper financial controls. They acted like adolescents.”
The good news is that most of the deals are described as performing with only a few in arrears. Jazco believes a takeover of investments is totally doable and they want to be completely transparent in the process. Jazco has indicated it will take a 1% management fee to pick up the pieces of the failed real estate operation.
As for iFunding, the web site will go dark on or around August 25th. iFunding is incapable of servicing existing investments. There appears to be no interest in resurrecting the crowdfunding platform.
Today, iFunding is a salvage project with Jazco apparently the only entity willing and able to provide a life line to beleaguered investors.