Crowdfunding Has Place
At the Table
PALO ALTO, CA—Crowdfunding has been getting a lot of attention as a method, good or
bad, of fundraising for real estate investments. As GlobeSt.com reported recently,
some experts see potential risks in this
method for inexperienced investors, but
other experts say crowdfunding is a way to
bring more capital into the market and
allow more investors to enjoy the benefits of
real estate investing for smaller increments
“There’s definitely a place for crowdfund-
ing in real estate,” says Adam Hooper, CEO
of locally based RealCrowd Inc. “It’s an asset
class that has typically been reserved for the
ultra-affluent or ‘typical’ type of buyer, but
our level is maybe $5 million to $20 million
in total purchase price. We replace that net-
work of 50 to 100 people with thousands,
making it available to people who would
never have the opportunity to invest in this
The passing of the Jobs Act in 2012
brought about several new crowdfunding
platforms, including GroundBreaker, a
general solicitation platform for real estate
projects. According to founder Stefano
D’Aniello, the Jobs Act allowed issuers who
choose to advertise a deal to no longer be
limited to selling to a limited number of
unaccredited investors, as dictated by the
Securities Act of 1933. Crowdfunding pro-
vides a mechanism for unaccredited inves-
tors to invest in these deals, but “these
crowdfunding rules are still being drafted
by the SEC, and we do not expect them
Hooper says it probably will be the mid-
dle to end of next year before the SEC and
FINRA are finished examining the Jobs Act
and determining how crowdfunding should
be impacted, but he is cautiously optimistic.
One change that has positively impacted
crowdfunding is that solicitation has been
given the green light. “Crowdfunding firms
can now advertise with the specific offerings
that we’re raising money for,” says Hooper.
“This is a huge shift.”
When crowdfunding proper for non-
accredited investors opens up, “it can be
more revolutionary and have more impact
than even solicitations,” Hooper adds. “It’ll
be interesting to see how it all plays out for
the next couple of years; we’re excited to see
where it all goes.”—Carrie Rossenfeld
The recent media firestorm surrounding the controversy engendered by Edward
Snowden, the former CIA contractor who exposed highly sensitive government
data, underscores the growing uneasiness we all have with living in the modern-technology world. In the past 30 days alone, book sales of George Orwell’s 1984
have spiked a whopping 7,000%.
While technological innovations have obviously spurred major advances across
all communication media, they have an equally powerful, indirect effect of exposing our most sensitive data to the cyber-criminal community. Real estate attorneys
often hold other parties’ funds—valued in the millions on dollars—in their attorney trust accounts and are not technology experts. And while the greatest threats
of a security breach usually are internal, every real estate firm can take practical
measures to protect itself and its clients in this modern-day era of cyber-crime.
Attorneys must monitor operating and IOLTA (attorney trust) accounts daily
for any suspicious activity. It is no longer acceptable to delegate the duties of
monitoring your accounts to someone who does not have a real-time understanding of the various closings, bulk sale escrows, contract signings (with significant buyer deposits) and
retainers for new files. Of course, your firm controller should reconcile your accounts at the end of
each month for accounting purposes, but it is the
job of those who have their pulse on actual, real-time deal flow to implement a
system for proper daily monitoring.
Just because the culture of hacking conjures up images of brilliant programmers in a dark basement room, with more knowledge of hacking than you will
ever possess, doesn’t mean you can’t thwart many attacks simply by applying common sense. For example, make sure you have the most current versions of antivirus software installed by a professional on your computer system.
Speak with your banker about processes he or she may already have in place to
protect you. For example, as a shield against check fraud, some banks offer
“reverse positive pay” which permits you to receive email notifications for your
approval each time a check is presented for payment. If you can obtain a “key
fob,” which automatically refreshes your online security passcode every 10 to 15
seconds, your chances of being victimized are reduced (although not entirely
You must also have a solid grip on the multitude of passwords in your “
cyber-life.” Carefully consider how to track them, differentiate them, how often to
change them and who else may need access (or limited access) to them.
The cliché is true: “failing to plan is planning to fail.” Create an institutional
culture of awareness about cyber theft and promote internal best practices with
your banking team, attorneys and administrative staff for keeping your clients’
information and funds secure.
Without a plan, a law firm’s chances of capping a loss and favorably positioning
itself are slim. An incident response plan equips employees with the knowledge
of whom to call and what to do when they suspect fraud.
As with a fire drill, practice helps your employees nail down the process and
timing of a response plan. This can have a meaningful impact on your ability to
stem any losses and protect your clients’ interests.
Aaron Y. Strauss is the founder and a partner at law firm A.Y. Strauss, with offices in
Roseland, NJ and New York City. David DePietto is CEO of NexFirm, based in New York
City. They may be contacted at firstname.lastname@example.org and email@example.com, respectively.
The views expressed here are the authors’ own.
By Aaron Y. Strauss and
For Attorneys and Other Professionals,
Safeguards Against Cybercrime