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Fundrise's CFO Fired for Alleged Extortion

WASHINGTON, DC—Fundrise has been the darling of the retail investment community since it launched its e-REIT last year.

By Erika Morphy | erikamorphy | | Updated on February 16, 2016
Fundrise's e-REIT invested in the Ace Hotel Pittsburgh Fundrise’s e-REIT invested in the Ace Hotel Pittsburgh
WASHINGTON, DC—Fundrise Advisors LLC, the commercial real estate crowdfunding company that quickly became the darling of the retail investment community last year with the launch of its e-REIT product , filed a statement with the US Securities and Exchange Commission that its CFO, treasurer and comptroller Michael S. McCord has been terminated for what it alleges to be extortion. CEO Benjamin S. Miller will serve as the interim CFO and treasurer in addition to his current duties. The filing , made last week, was first reported in TheDeal. It gave little information about the events surrounding the allegations. Based on what is in the filing, it appears that McCord believed that Fundrise acted inappropriately in two real estate transactions and attempted to shake down the company for $1 million. According to the filing:
Though we believe there is no merit to his claims, we take any allegation with the utmost seriousness. As a result, we have engaged a third-party financial audit firm to conduct a thorough investigation concerning his allegations. We are pursuing all appropriate and precautionary steps to protect our investors and our organization.

Fundrise has also contacted law enforcement to report the allegations, the filing said. Investors Reaction? How, if it all, investors will react to the allegations will play out obviously. To date, it is clear that demand for Fundrise’s offerings has been insatiable. Four hours after it launched in December 2015, it was oversubscribed by 403%. Subsequent offerings also sold quickly, within hours.

Last year an offering to buy a U Street apartment in Washington DC sold out in 2 hours and 22 minutes. Last year an offering to buy a U Street apartment in Washington DC sold out in 2 hours and 22 minutes.
Even before the e-REIT, Fundrise had projects sell out before all investors could get in on the action. In November of 2015, the purchase of a 14-unit multifamily property on U Street in Washington DC, sold out in 2 hours and 22 minutes . That translated into $11,000 per minute raised for the $1.6 million condo conversion. Now in its second month, the e-REIT has made a handful of similar purchases for its platform including a $2 million preferred equity investment in the refinancing of a multifamily apartment in Richland, Washington and a $2.275 million equity preferred equity investment in the Ace Hotel Pittsburgh, an iconic structure in the city as a century ago it was a YMCA building.

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