Crowdfunders In A Bankruptcy: Go To The Back Of The Line

Everyone knows that startup financing is risky, especially crowdfunding.

Although Kickstarter is requiring companies to show a prototype, the risk of design, production and delivery is still high and many companies fail.

What you should know is that when your crowdfunded company goes into bankruptcy, as a donor, you will be last in line to receive any assets that may be left over after the company finishes paying off its secured creditors, many of whom may be insiders who lent money to the startup.

As a pre-buyer (the likely scenario), you will be an unsecured creditor and at the bottom of the list of payees.

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at:
This entry was posted in accredited investor, Broker dealers, checkbook, Crowd Fund Act, Crowd Fund Act of 2012, Crowd Funding At the Margins, Crowd Funding Platforms, deposits, fraud, Funding Portals, SEC, Small Business, technology, VC, Venture Capital, Wall Street and tagged , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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