One of the pioneer companies for crowdfunding is now facing legal battles. According to The Real Deal, iFunding is being sued for fraud.
Crowdfunding is described as funding a particular project or venture. This is done through raising monetary contributions from different sources and investors.
The complaint was made by a former partner, the CapStack Partners, and it was filed at New York Supreme Court late last month. The complaint's major concern was that the company is prone to misconduct.
The boutique investment bank said that iFunding was not able to raise the needed and agreed sum through its platform. Aside from that iFunding also lied a couple of times regarding its when it comes to its performance and the series of delays that it caused. Given that situation, it brought CapStack "injury and detriment."
Reportedly, on top of those alleged complaints, CapStack also filed iFunding for "breach of contract, breach of fiduciary duty, fraudulent inducement, fraudulent concealment and deceptive business practices." The bank also seeks for damages for a minimum of $585,000.
However, iFunding's founder and CEO William Skelley told The Real Deal that the accusations made against his company were all rubbish. Skelley said, "We believe the lawsuit is completely without merit and intend to contest it vigorously."
It has been reported that the conflict started back in August when iFunding and CapStack signed separate deals to crowdfund two real estate developments in Ohio and in Missouri. iFunding and CapStack agreed to equally split the brokerage fees. It was mentioned in the lawsuit that iFunding agreed to raise $2 million for the first project and $3.2 million for the second. But then, that did not happen and iFunding fell short.
And as for the Ohio deal, Skelley allegedly told CapStack that they will only release the raise if CapStack will agree to double the money. And it was stated in the suit that, "Acting in extreme bad faith, (iFunding's counsel Robin Sosnow) and Skelley made clear that if iFunding refused to immediately sign the revised agreement, iFunding would not deliver the investors' funds and the entire transaction would collapse." It was also mentioned that CapStack agreed to the revised conditions since they are left with no choice.
To sum it up, Skelley said that all the accusations were "completely unfounded." He added, "We are very proud to have raised over $4 million dollars in a matter of ten days for two projects that CapStack brought to us late last year."
