The U.S. Securities and Exchange Commission charged Netcapital Inc. with fraud, alleging the crowdfunding platform inflated its reported revenue. The SEC's complaint, filed in federal court, targets misrepresentations in financial reporting that regulators say misled investors raising capital through alternative channels.
Netcapital allegedly engaged in a scheme to boost reported revenue figures, recognizing income from transactions that either did not occur or were improperly accelerated, the SEC said. The scheme created a false picture of financial health for potential investors.
Netcapital operates an online portal connecting private companies with investors. The SEC's charges highlight risks in less liquid, privately held markets, where public disclosures are often less stringent than those required of listed companies. The case puts pressure on competing platforms to tighten internal controls.
Equities weakened on the day. The Nasdaq Composite fell 0.3 percent to 26,605, the S&P 500 edged down 0.1 percent to 7,753, and the Russell 2000 dropped 0.6 percent to 3,017.
The SEC is seeking permanent injunctions against Netcapital, along with disgorgement of ill-gotten gains and civil penalties.
