Equity crowdfunding platform Crowdcube is taking legal action against Student Rents to recover investors’ money after a UKTN investigation revealed the Scottish proptech startup fabricated details in a pitch deck.
Crowdcube said it is “in the process of fully refunding” the 170 investors who participated in the funding round.
The crowdfunding platform added it has conducted a “thorough investigation” that found evidence Student Rents “fabricated” some of its paperwork and bank statements.
Crowdcube is now launching legal proceedings against Student Rents and its directors, Grant MacCusker and Jamie Stewart, to recover the cash.
Crowdcube said investors on its platform invested £23,173 into Student Rents, a company that claims to be the “Uber of student rentals”.
According to the Student Rents Crowdcube page, the company raised just over £466,000 in a round that closed in January. Crowdcube said that Student Rents supplied evidence that it raised £443,000 outside of the crowdfunding platform.
“These were not funds invested by Crowdcube investors,” Crowdcube said. “The investment paperwork and bank statements for this investment formed part of our investigation, and it has subsequently emerged that at least some of this extra investment was fabricated. This will form part of the legal case against Student Rents.”
Crowdcube will reimburse investors directly and is taking legal action to recover the £23,173.
“No Crowdcube investors will lose money as a result of this company’s fraudulent actions,” a Crowdcube spokesperson told UKTN.
They added: “We are deeply disappointed that this situation occurred. We take the safeguarding of our investors’ capital extremely seriously and have stringent due diligence and compliance processes in place to protect against misleading claims and evidence.”
Earlier this month a UKTN investigation revealed that Edinburgh-based Student Rents listed three fake employees, using stock images, on a Crowdcube investor pitch deck.
That followed a separate UKTN investigation that revealed MacCusker, founder of Student Rents, fabricated a buyout of his other venture, a proptech company called Letting Cloud, by US short-term rental giant Airbnb.
Student Rents appointed 19-year-old Stewart, who is MacCusker’s son, as CEO last month. Last Friday MacCusker resigned as director from Lettinglord, the legal name of Student Rents, Companies House filings show.
When UKTN approached MacCusker and Stewart for comment, the following statement was provided via a Letting Cloud email address: “We are working with Crowdcube and all investors are being refunded like Crowdcube has said. We don’t appreciate UKTN, Robert Scammell or other media outlets to make [sic] cheap headlines on this when the issue at hand is currently being resolved.”
The fraudulent crowdfund raises questions about Crowdcube’s due diligence process, with accountants telling UKTN that there were also red flags about Student Rents’ financial projections.
The company raised at a £4.5m pre-money valuation, despite Companies House filings showing it had tangible assets of just £13,813.
Crowdcube, which launched in 2009, said it has raised $1.5bn for 1,300 companies across Europe.
“We are confident that this was an isolated incident involving sophisticated forms of fraud and have every confidence in our due diligence processes, which we regularly review,” Crowdcube added.
“We appreciate the trust that our investors place in us and will continue to work tirelessly to maintain that trust.”
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