Crowdfunding: Do you know where your money is going? - WAFF-TV: News, Weather and Sports for Huntsville, AL

Crowdfunding: Do you know where your money is going?

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Joseph Borg, Alabama Securities Commission Joseph Borg, Alabama Securities Commission
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MONTGOMERY, AL (WSFA) - Maybe you've heard of websites like Kickstarter and GoFundMe. They are part of a new breed of online fundraising tools. The process is called crowdfunding. It allows individuals to donate small amounts, but when added to the 'crowd,' it turns into large amounts of money.

Many non-profit groups and charities use these sites to raise money legitimately. But the Alabama Securities Commission wants you to think twice before you type in your credit card number.

When congress passed the JOBS Act, it included new rules that make crowdfunding sites exempt from federal oversight. That means that crowdfunding requests are not reviewed by the Securities and Exchange Commission.

Alabama Securities Commission Director Joseph Borg is particularly concerned about investment opportunities on crowdfunding sites. He says scammers could use the sites to peddle fraud.

"Once exempt, crowdfunding investments will not be reviewed by regulators before they are offered to the public, nor will they be required to provide the same level of disclosures to investors or regulators required of securities offerings," Borg said.

"Investors will need to be extremely cautious as they may be bombarded with all manner of offerings and sales pitches."

Experts say it's important to know where your money is going. If you know the group that is raising money, a crowdfunding site is most likely a safe way to make a donation. But if you're approached about an unfamiliar investment opportunity, make sure you do your homework.

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