What Was The Fundrise Scandal? Is Fundrise Still A Viable Option?
Business, Finance

What Was The Fundrise Scandal? Is Fundrise Still A Viable Option?

Investors are constantly on the lookout for innovative strategies to diversify their portfolio. Commercial real estate investing can be a rewarding method to diversify your portfolio and expand your money. Fundrise allows investors to contribute as little as $10 in its eREITs and eFunds. They have been accused of being involved in a scandal. Is this company trustworthy, and should investors continue to utilize it in their investment portfolios? Let’s have a look at it in this article to know about it. 

Michael McCord, the company’s former CFO, says that some real estate transactions were mishandled by the company. It was determined that no crime had been committed following an independent accounting firm’s evaluation and an investigation by the SEC. 

How Does Fundrise Stack Up Against The Competition?

PlatformMinimum InvestmentFees

$10

1% FeeOther fees may apply

$1,000

2% FeeOther fees may apply

$25,000

0.5% – 2.5% FeeOther fees may apply

What Was The Fundrise Scandal All About?

What Was The Fundrise Scandal All About?

Numerous aspiring real estate investors are unable to invest in properties right immediately due to a lack of funds. Through crowdsourcing, Fundrise guaranteed a solution with high dividends. Non-accredited investors were offered the chance to influence the real estate market while also profiting from their initial investment. Whereas it appears to be a terrific deal, the reality can be a little hazy. Fundrise says that Michael McCord, the company’s former CFO, tried to extort them for over $1 million in addition to more shares of the company’s stock back in 2016. CEO Benjamin Miller contacted both the Securities and Exchange Commission and the local police station as a result of this. 

He handed over the accounts to an independent accounting firm to keep their investors’ minds at ease. McCord claims that his dismissal from the company was due to his reporting of fraudulent behavior within the company. He informed Miller of his worries, but an hour later he was shut out of the website and unable to access information systems. According to Fundrise, the accusations he made about the inappropriate conduct of two real estate transactions were unfounded and simply served to achieve McCord’s purpose of extorting money from them. Benjamin Miller stepped in as interim CFO and treasurer during his absence. The SEC looked into both parties’ assertions to see who was telling the truth in this tangled issue.

What Was The Result Of The SEC’s Fundrise Investigation?

What Was The Result Of The SEC's Fundrise Investigation?

The SEC has made no statement confirming or refuting McCord’s allegations against Fundrise. However, the company has determined and informed its investors that nothing is wrong based on its independent accounting firm’s survey of the books. According to ChonReznick, the accounting company, the valuations of the two properties McCord claimed were fraudulent were in line with industry standards. To put it another way, there was no cause to be worried or to seek additional payments from the company to cover them up. Miller filed the claim against McCord to comment on the situation. They said that because McCord had not followed through on any of his threats to the company, there was no evidence of a true crime. 

Should You Still Invest In Fundrise?

Should You Still Invest In Fundrise?

Despite the former CFO’s involvement in the scandal, Fundrise appears to be a viable option for anyone looking to diversify their portfolio. This enables non-accredited people to invest their funds and invest in real estate assets like eREITs and eFunds. Many people might not have this opportunity if it weren’t for Fundrise. The good thing is that the entry barriers are low. With as little as $10, prospective investors can get started. Dealing with real estate developers to handle client portfolios and organize real estate transactions, their staff takes care of every detail of your investment. It can be found in all 50 states. Low minimum investment, user-friendly interface on both the website and mobile app, IRA accounts optional, open to all are just a few of the benefits of using Fundrise. 

What Are The Disadvantages To Investing with Fundrise?

What Are The Disadvantages To Investing with Fundrise?

There are numerous compelling reasons to invest with Fundrise; there are a few disadvantages that investors should be mindful of.

Lack of Liquidity: Several investors’ initial gripe is that they can not get their money out of the app quickly enough. When considering real estate investment, keep in mind that buying and selling properties is a more illiquid investment than buying and selling stocks. It may take some time for you to be able to withdraw your investment after money has been freed up. 

Fundrise Fees: Another common issue is that the fees do not fluctuate according to the amount of money you invest. All customers receive the same rates, which are calculated as a percentage of the amount invested. Whereas this implies that certain people will pay more for larger investments than others, the cost is proportionally the same regardless of the amount you put in. To enable a better understanding of the fees, they usually charge around 1%. (0.15 percent  in an annual advisory fee and 0.85 percent  in an annual asset management fee).Of course, you may be charged additional expenses, such as origination fees (0% to 2%), early redemption fees (1% to 3%), and IRA fees ($125).

Who Should Consider Investing In Fundrise?

Who Should Consider Investing In Fundrise?

Since it is straightforward and easy, many individuals like the notion of investing in Fundrise. You don’t need a large savings account or prior real estate investing experience to invest. Knowing who Fundrise’s ideal client is will assist investors in making informed investment decisions. Fundrise is a fantastic option for long-term investors. Since these assets are less liquid than mutual funds and stocks, getting money back from these investments can take some time. If an investor believes he or she will need to access those assets fast, eREITs and eFunds investments should be reconsidered. Fundrise cannot guarantee that a buyer will be accessible when an investor is ready to sell because they are not listed on a public exchange. Fundrise might be an excellent method to diversify your portfolio if you already have stocks and bonds in your portfolio.

Fundrise.

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