Ohio halts operation of crowdfunding site SoMoLend

August 19, 2013


SoMoLend gets cease and desist order

Government investigations into the crowdfunding space continue as the state of Ohio issues a notice of Intent to Issue a Cease and Desist Order to SoMoLend based out of Cincinnati. SoMoLend, short for Social and Mobile Lending, is potentially facing allegations of securities and financial projections fraud due to providing overly optimistic performance numbers to investors.

Long seen as a space virtually free of traditional financial and government institutions, it appears that the crowdfunding industry is being looked at more closely now by lawmakers. As funds are being exchanged and disbursed from investors to business and project owners, some lawmakers argue that there needs to be an intermediary involved in order to regulate these interactions and offer investor protection.

Government making an example of SoMoLend

But DJ Paul, vice chairman of crowdfunding industry trade group CIFRA (Crowdfund Intermediary Regulatory Advocates), says this assertion against SoMoLend is just part of a bigger government play to get an in to the crowdfunding industry.

“Look at the contents of Ohio’s letter to the SEC, and then read the state’s Notice/Order against SoMoLend,” says Paul. “What’s clear to me is that Ohio is using Candice (Klien) and SoMoLend to go after an industry and not just”

How could this affect business owners?

While many business owners can benefit from fundraising on crowdfunding platforms, more sites could come under fire in a manner similar to SoMoLend and potentially decrease owners’ ability to raise capital via crowdfunding.

Businesses should keep up to date with any news pertaining to their state’s views on crowdfunding, and investors will need to do the same in order for both parties to know the likelihood of having a successful interchange without fearing a Cease and Desist order.

Bitcoin and other digital currencies are also facing similar scrutiny, therefore it is possible that these unregulated financial currencies and tools may now be tied to a government leash.

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Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.

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