Railbus Is Scamming Hundreds Of Investors Over Several Years Using Fake Equity Crowdfunding Offering
A number of investors have flagged Railbus Inc. to me over the past few months. The company, through a convoluted investment scheme, aims to raise funds for a high-tech railbus project in the Middle East and has been raising funds for over a year. The raise is on a self-hosted website and found at railbus.com. The rise of online investments, including cryptocurrency and equity crowdfunding, has also given rise to a substantial rise in scams and fraudulent investment-based offerings.
Millions of Americans have fallen victim to Crypto scams due to the unregulated nature of the industry. This rise is likely attributed to people being more comfortable with investing online as the offerings become more commonplace. But it seems there might be a subsequent rise in fake equity crowdfunding offerings as well. Unfortunately for scammers, equity crowdfunding and the broader venture environment are substantially more regulated, making scams easier to spot.
How To Spot These Scams
In the U.S., you must file a securities exemption with the SEC to sell securities in the U.S. There are plenty of ways to make this happen, but for the non-accredited population, there are only two: Reg A and Reg CF. One of the most common accredited exemptions is Regulation D, which requires you to be an accredited investor, and issuers must still file a notice with the SEC within 15 days of the first sale. There are different types of Reg D investments, but they often have similar requirements or attributes, including:
High investment minimums: Often $5000+ to invest in Reg D's, if not more, due to legal costs, verification, limited spots, and more.
Lack of Solicitation: While not all Reg D's disallow solicitation, it's rare if not illegal, to see ads or solicitations for certain Reg D offerings.
Accreditation Verification: You should be asked to verify your accreditation status in some way, even if it's self-certifying. This is typically required for Reg D.
Verify on the SEC EDGAR website: If they are selling securities, they should have filed something with the SEC. Search their company name here. If they haven't, they are likely breaking the law or illegitimate: https://www.sec.gov/edgar/search/
Here, Railbus is running Facebook ads, allowing investors to "invest" for as low as $100 and haven't filed anything with the SEC. There are also 10,000 spots available, and no accreditation is needed to 'invest'. All of this indicates they are not attempting to utilize an accreditation-based exemption.
The low investment amount and general solicitation are more reminiscent of a Reg A or Reg CF-type investment. Again, but nothing has been filed with the SEC.
Spotting a Reg CF or Reg A is easy because there are mandatory disclosure requirements on marketing materials, their page, limitations on what they can say, and all equity crowdfunding offerings must be through an equity crowdfunding portal or broker-dealer. Here, they do not have any of those disclosures; there is no broker or portal listed (and I know most of the main players, and this does not fall under them.) As well, they either need to file an offering statement with the SEC, or file a preliminary for a test the waters offering. If it was a TTW, there would have to have a "no money or consideration is being accepted at this time" disclosure on the page.
There are absolutely 0 indications this is a valid offering.
How To Prevent Being Scammed
If you're not an accredited investor, then the only way you can invest is through a broker-dealer or equity crowdfunding portal. Equity crowdfunding portals have a duty to reduce fraud on their platforms. Investing through an equity crowdfunding platform does not mean that you cannot get scammed, but when combined with proper due diligence, you're at a drastically higher chance to not get scammed. Even moreso, investing on top platforms will help reduce being scammed.
Top equity crowdfunding platforms include:
StartEngine
Wefunder
Republic
DealMaker (white label)
Dalmore Group (white label)
Similarly, you can use due diligence tools like Hubtas.com to help reduce your chances of fraud. Hubtas outlines red flags in companies and draws most of their data from the SEC website. Meaning if a company is on Hubtas.com, they have registered with the SEC and filed a Reg CF or Reg A exemption with the SEC. Hubtas also provides rating schemes to help indicate strength based on various metrics.
About The Railbus Scam
This is one that I have had flagged to me several times over several months, but the company was incorporated in 2021 and been running ads as early as 2022. Its likely hundreds, if not thousands, of investors have been scammed for hundreds of thousands, if not millions, by this offering. The entire offering is just to get a 200x return for "low risk" and similar questionable statements. The offering page is quite extensive and meant to impersonate that of a white-label equity crowdfunding offering.
Is Railbus a Scam?
Yes, the investment associated with Railbus has all the markings of a scam and has no indications of being a legitimate offering. Beyond the lack of SEC filings, there's a number of obvious concerns with their investment landing page.
The SEC published an article in 2014 detailing "10 Red Flags That an Unregistered Offering May Be a Scam." Let's take a look at those red flags in relation to the Railbus offering:
Claims of High Returns with Little or No Risk
This exact claim is mentioned several times all throuhgout the page, including in the first line of the page:
Similarly, the company has several promises of high returns, which is a trademark of most scams:
Unregistered Investment Professionals
As described above, this offering has not been registered with the SEC in any capacity.
Aggressive Sales Tactics
The SEC describes this as "Scam artists often pitch an investment as a “once-in-a-lifetime” offer to create a false sense of urgency. Resist the pressure to invest quickly and take the time you need to investigate thoroughly before sending money or signing any agreements. Any reputable investment professional or promoter will let investors take their time to do research and will not pressure for an immediate decision."
Problems with Sales Documents
If someone is asking for your money, but can't take the time to spell things correctly, that should be a red flag.
Both their "Share Reservation Agreement," and their landing page have a number of errors, grammar errors and clunky language. Here's their "Share Reservation Agreement"
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://railbus.com/rbdocs/sra.pdf
There's more, but you get the idea.
No Net Worth or Income Requirements
As noted above, Net Worth requirements are required in Reg D offerings, so this can be an important indicator in deteremining if this is legit. Here, you can checkout with PayPal or card without any verification:
Sham or Virtual Offices
They use a virtual office in Delaware:
Unsolicited Investment Offers
This company is using Facebook and Twitter ads to solicit investments:
Suspicious or Unverifiable Biographies of Managers or Promoters
There are a lot of fake people on their site. Nearly every person on their about page is not verifiable. Google these names and see if you can find them:
One other red flags not mentioned by the SEC include:
International Offerings
International offerings are more likely to result in fraud because there's no recourse for investors and U.S. entities do not have jurisdiction over the scammers. This makes it hard to hold scammers accountable. This offering is located in the United Arab Emirates:
D709, D102 Dubai Silicon Oasis, Dubai, United Arab Emirates
It does have a virtual address in Delaware, but that means nothing.
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