Financial watchdog investigates Crowdcube’s role in fast-food firm’s collapse

The Financial Conduct Authority (FCA) is investigating Crowdcube’s role in the collapse of a fast-food firm, which raised £1.5m through the crowdfunding platform. The FCA is looking into whether Crowdcube properly assessed the risks of the investment and whether it provided adequate information to investors.

The fast-food firm, which was not named, collapsed in 2018, just two years after raising the funds. The collapse left investors with nothing, prompting questions about the due diligence carried out by Crowdcube.

Crowdcube is one of the UK’s largest crowdfunding platforms, allowing investors to buy shares in start-ups and small businesses. The platform has raised more than £1bn for more than 1,000 companies since it was founded in 2011.

The FCA’s investigation is part of a wider crackdown on the crowdfunding industry, which has grown rapidly in recent years. The regulator has raised concerns about the risks involved in investing in start-ups and small businesses, which are often untested and unproven.

Crowdcube has defended its due diligence process, saying it carries out extensive checks on companies before allowing them to raise funds on its platform. The company also said it provides investors with detailed information about the risks involved in investing in start-ups.

However, the FCA’s investigation is likely to raise questions about the effectiveness of Crowdcube’s due diligence process and whether it is doing enough to protect investors.

The collapse of the fast-food firm is not the first time that Crowdcube has faced criticism over its due diligence process. In 2016, the platform was criticised for allowing a company to raise funds despite having a history of financial difficulties.

The FCA’s investigation is a reminder that investing in start-ups and small businesses is not without risk. While crowdfunding platforms like Crowdcube can provide a valuable source of funding for entrepreneurs, investors need to be aware of the risks involved and do their own due diligence before investing.

The collapse of the fast-food firm is a cautionary tale for investors and a reminder that even the most successful crowdfunding platforms can make mistakes. The FCA’s investigation will hopefully provide some answers about what went wrong and how investors can be better protected in the future.