Equity crowdfunding is typically a pretty quiet industry. But according to recent court filings, there's a large lawsuit taking place between two of the largest white-label services in the equity crowdfunding space.
DealMaker, one of the most significant players in the equity crowdfunding white-label services domain, lodged a lawsuit against competitor Issuance Inc. earlier this year. The U.S. District Court for the Central District of California has recently allowed the lawsuit to proceed following its judgment on the pretrial motions.
Darren Marble, CEO of Issuance, is the executive producer of the startup investing TV show, "Going Public." The show offers viewers an opportunity to invest in startups during the broadcast.
DealMaker, a white-label technology enterprise, aims to infuse technology into capital markets. With most private capital markets operating privately and excluding the general public, DealMaker seeks to change this. They design backend technology that enables organizations of all sizes to raise funds on their terms, thereby enabling companies to receive funding from their advocates, customers, and stakeholders.
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In a claim filed in February, DealMaker accused Marble of breaching the contract and stealing trade secrets. According to the allegation, Marble falsely proposed a partnership with DealMaker. The latter was supposed to be the backend technology solution for investors during "Going Public."
According to the lawsuit, Marble initiated numerous fundraisers over several months but didn't raise any funds. In the process, Marble obtained "full administrative access" to DealMaker's technology and trade secrets. These included methods to digitalize the subscription agreement terms, finalize payment processing integration, link to the offer site using embeddable flow, monitor subscribers, and finalize the subscriber onboarding questions.
Upon accessing the necessary information, Marble ended the agreement and announced the launch of Issuance, a direct competitor to DealMaker.
In response to the allegations, Marble told Crowdfunding Insider:
“DealMaker is well aware that their allegations in this lawsuit hold no weight. We are eager to have our day in court and expect to triumph. Issuance has seen rapid growth due to the provision of a superior product at a market discount.
"We have innovated our technology that allows retail investors to effortlessly purchase securities in less than a minute, with the option to use Apple Pay and Google Pay, ensuring improved outcomes for our clients.
"Besides our leading Reg A+ product, we have recently launched a Reg D 506(c) product, which has been swiftly adopted by U.S. and Canadian issuers looking to quickly and efficiently raise growth capital.
"We anticipate expanding our market presence and continuing to provide an investment platform that gratifies both issuers and investors.”
DealMaker's lawsuit calls for injunctive relief directing the defendants to erase and destroy confidential information. It also demands monetary damages associated with any potential damages.