Crowdfunding platform Crowdcube faces a slew of investigations from a financial watchdog after a group of investors say it failed to verify a company’s business plans resulting in them losing thousands of pounds.
Sixteen investors have asked the Financial Ombudsman Service to step in after fast-food delivery company Zing Zing, which raised over £650,000 in 2017 on Crowdcube, collapsed into administration in 2020.
The group claims that Zing Zing courted investors with an old version of its business plan before overhauling its plan after the funds had been raised, and Crowdcube failed to check this and verify the plans.
The claims from the group come after the Ombudsman previously ruled in favour of one investor, ‘Mr S’, who participated in Zing Zing’s funding round and ordered Crowdcube to pay him £18,000.
Adam Caplin, who has coordinated the group of investors via Whatsapp, said: “There is a duty of care from these crowdfunding sites to make sure that the information that they put out there is as appropriate, fair and as accurate as it should be.
“It’s all very well for Crowdcube and the companies founders Darren Westlake and Luke Lang (pictured) to fly the flag and say they had a record fundraising for some company and to collect their fees, but they have a responsibility – they have responsibility to the investors that use their site.”
One of the group of investors in Zing Zing spoken to by City AM lost £17,000 in the funding round.
In its previous ruling on Zing Zing in favour of Mr. S, the Financial Ombudsman Service wrote that it was apparent that Crowdcube knew that Zing Zing’s plans for using the funds were “at an early stage and were not substantiated with sufficient documentary evidence” but “Crowdcube didn’t make (the claimant) aware of this anywhere in the pitch.”
The firm has previously addressed the ombudsman’s ruling on the case of Mr S, saying: “The company’s pitch was reviewed according to our Due Diligence Charter, and approved as a financial promotion to ensure it was fair, clear and not misleading. Our publicly available Charter outlines the full due diligence undertaken on every business that lists on the platform.
“We have stringent due diligence processes in place, and we are continually enhancing the processes we have to ensure we maintain the highest of standards for our growing investor community.”
Crowdcube said it would not comment on the ongoing investigations.