Q: I signed a SAFE note and invested $80k with a celebrity's start-up that has proven to be not at all as advertised
The financials they provided showed high earnings when really they have not made anything thus far. They are very dodgy and haven't shown me 2023 earnings even though they said they would provide financial statements each month--I have seen no financial info since my September 2023 investment.
Overall, I was told the company valuation was $50m when I was investing and that there were co-investors so they round was closing shortly. There doesn't appear to have every been other investors.
I blame myself for all of this (especially signing Safe Note), and plan to try and work this out with them--but what recourse would I have. I only have a few of the fake financials they showed me back in Sep 23 which I'm kicking myself for.
A:
Based on the information you've provided, it seems that you may have been misled or defrauded by the celebrity's start-up when making your investment. Under California law, you might have some legal recourse, depending on the specific circumstances and the evidence you can gather.
Here are a few potential legal avenues to consider:
1. Fraud: If the start-up knowingly provided false financial information to induce your investment, this could constitute fraud. You would need to prove that they made false representations, knew they were false, and intended for you to rely on them when making your investment decision.
2. Breach of contract: If the SAFE note or any other agreement you signed required the company to provide monthly financial statements and they failed to do so, this could be considered a breach of contract. You may be able to seek legal remedies based on this breach.
3. Securities fraud: Depending on the nature of the investment and how it was offered, the start-up may have violated state or federal securities laws. These laws prohibit misrepresentations and omissions in connection with the sale of securities.
4. California's Unfair Competition Law (UCL): This law prohibits unfair, unlawful, and fraudulent business practices. If the start-up's conduct falls under any of these categories, you may be able to bring a claim under the UCL.
To pursue any of these legal options, you should consider taking the following steps:
1. Gather all relevant documentation, including the SAFE note, any financial statements or projections provided, and correspondence with the start-up.
2. Consult with an experienced business or securities litigation attorney to assess the strength of your case and advise you on the best course of action.
3. Attempt to resolve the issue with the start-up directly, either through negotiation or mediation, before resorting to legal action.
Keep in mind that legal action can be costly and time-consuming, so it's essential to weigh the potential risks and rewards before proceeding. An experienced attorney can help you evaluate your options and make an informed decision.
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