Crowdfunding platform Fundrise fires CFO over extortion allegations

Michael McCord allegedly tried to blackmail firm over “inappropriate” deals

Feb.February 15, 2016 01:25 PM

Fundrise fired its mortgage REIT’s chief financial officer and treasurer Michael McCord, alleging that he tried to extort over $1 million from the crowdfunding platform, according to a new filing with the Securities Exchange Commission (SEC).

In a letter to investors on Feb. 10, Fundrise’s general counsel Bjorn Hall wrote that the alleged extortion involves claims that the company “acted inappropriately concerning two real estate deals.”

“Though we believe there is no merit to his claims, we take any allegation with the utmost seriousness,” Hall wrote. “As a result, we have engaged a third-party financial audit firm to conduct a thorough investigation concerning his allegations.”

It wasn’t immediately clear how Fundrise alleges McCord tried to extort the company, which real estate deals the letter refers to, or whether the allegations have any merit. McCord could not immediately be reached, and Fundrise did not respond to a request for comment.

According to an SEC filing from November, McCord, 27, worked at auditing firm KPMG for several years before joining Fundrise in 2014. Ben Miller, CEO of the company, will assume his responsibilities temporarily.

The three-year-old firm, which has raised $41 million in venture funding and is backed by industry heavyweights like Silverstein Properties’ Marty Burger and the Ackman-Ziff Real Estate Group, crowdfunds real estate projects by allowing both accredited and unaccredited investors to invest through its website. In December, it launched a non-listed mortgage REIT. Unlike other non-listed trusts, the so-called eREIT is regulated under Regulation A under the JOBS Act, which allows investors to buy shares online without having to go through a registered broker-dealer.

The eREIT is a public company listed with the SEC, which is why Fundrise had to notify investors that it fired McCord. As of Monday, McCord’s name was not displayed alongside other executives on Fundrise’s website.

As of Jan. 22, Fundrise’s REIT has raised $16.9 million from investors, according to an SEC filing. The REIT has raised eyebrows for its aggressive online advertising, which includes cherry-picking numbers to make its products seem as attractive as possible.

Last year, co-founder Dan Miller, brother to Ben, left the firm for unknown reasons.

Related Articles

CrowdStreet CEO Tore Steen (Credit: iStock)

CrowdStreet hits $1B milestone, crowdfunding firm claims

Rodrigo Nino, 84 William Street in Lower Manhattan and 1400 N. Orleans Street in Chicago (Credit: Facebook, Google Maps)

Prodigy Network investors say millions in limbo as company shuts them out

Cadre founder Ryan Williams and Allen Smith

Cadre brings on former Four Seasons CEO as president

As crowdfunding startups rethink their business model, many are becoming more like traditional real estate investment firms (Credit: iStock)

To survive, crowdfunding firms are remaking themselves

Crowdfunding: Crowded out?

Crowdfunding: Crowded out?

Prodigy CEO Rodrigo Niño (Credit: Getty Images)

Prodigy Network hit with second lawsuit in
2 months

Crowdfunding startup RealtyShares to cease investing, faces mass layoffs

Crowdfunding startup RealtyShares to cease investing, faces mass layoffs

What’s old is new: Real estate private equity firms raise funds by emailing investors

What’s old is new: Real estate private equity firms raise funds by emailing investors