the counsel of an investment adviser and attorney before proceeding. This is especially true of any investment involv- ing real property, given the potential leverage being used. Investors should have a clear understanding of whether their equity investment is being leveraged with debt, as this greatly impacts the potential downside to the target investment. As we are painfully reminded during real estate downturns, property values can decline substantially. While they rarely plummet to zero, an investor’s share or membership interest in a company owning that real estate can certainly drop to a zero value, especially when the project company is heavily leveraged. Debt will always have priority over equity in a dissolution or bankruptcy context. Thus far, crowdfunding has been greeted with much en- thusiasm both by investors and by businesses seeking to raise capital. Prior to this legislative shift, it was illegal to advertise
unregistered securities in the United States. Under Title III crowdfunding, issuers are now free to advertise and solicit private offerings to investors through social media platforms. This less-regulated environment seems appropriate for the times, but prospective investors should, as always, be vigilant because those seeking to defraud investors may also harness crowdfunding as part of their scheme. Proper due diligence, professional counsel and common sense, it seems, remain just as relevant today as they were prior to crowdfunding. • Paul R. Wassgren is a law partner at Fox Rothschild LLP and practic- es in the areas of securities, project and real estate finance, mergers and acquisitions and general corporate law. Using the firm’s Las Vegas and Los Angeles offices as his home base, he handles matters for clients ranging from individual entrepreneurs to multinational corporations. He can be reached at pwassgren@foxrothschild.com.
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