Short answer, I don’t know. But based on how I’m reading the definition of “accredited investor”, it seems mostly set up to allow investment in companies that are not producing the required documentation for being publicly traded, as @irvinewade mentions is the case in Australia.
By requiring the company to offer only to accredited investors, it’s basically putting a big warning flag on the investment to the general public, but this warning is purely structural, it doesn’t say anything about the underlying quality of the investment, good or bad.
I can’t imagine that by misrepresenting oneself as an accredited investor, there is any risk of legal action against the investor – I think it’s just a way of insuring that anyone who is not an accredited investor has no legal recourse against the issuing company if their investment ends up being worth nothing. Anyone else have any thoughts/experience along this line of reasoning?
The law purports to be there for the protection of non-accredited investors and therefore it creates a duty on the company not to take money from non-accredited investors (the idea being: they don’t know what they are doing and they can’t afford to lose the money). So nothing is going to happen to you if you invest and you are not an accredited investor. For non-U.S. investors, there are potentially additional complications as the investment offering generally also has to comply with the local securities laws in the place where the investor is resident. otherwise the issuer could fall afoul of the authorities in that pther jurisdiction. The only party which could potentially get in hot water, if they are on the wrong side of these regulations - is Purism, and the most likely thing that would trigger it would be someone who does not meet the accredited investor criteria making a complaint to the SEC.
I’m afraid the U.S. is a nanny state in a lot worse ways these days than merely the “accredited investor” regulations.
… if the company does not meet the additional disclosure requirements necessary in order to take money from just anyone i.e. to make a public offering.
I can see the logic of investing in Purism, since there is growing demand for privacy in ICTs and Purism offers a unique approach that allows it to charge high margins. However, it is undeniable that a number of Linux PC companies have gone out of business (LibreBox, ZaReason and Station X) and every company making Linux phones in the past has given up (except Jolla which went through bankruptcy and no longer sells hardware), so this isn’t an investment for ordinary people who can’t afford to take a loss.
Purism has managed to raise $1,762,000 in 11 days and still has 49 days to go on this financing round. This calms a lot of my worries about the financial health of the company.
First of all, I hope that Purism will take this money to pay for mass production to fill all the back orders for the Librem 5 (once it can get the parts) and to pay refunds to the people who canceled their orders. That will do a lot to restore the public reputation of the company and generate new orders for the phone since people can see that it is being delivered.
I realize that shipping out so many phones at once will swamp support, so Purism needs to start relying on wiki-style documentation to address people’s problems with the phone, rather than answering each question individually. Most customers would rather have the hardware in their hands even if there are many problems with the phone, rather than wait another year for the phones to trickle out, even if it means that many of their support questions won’t get answered.
The second thing that I hope is that Purism will be able to hire some more people to work on the L5’s software. My dream is that mobile Linux will become a viable alternative to the Android/iOS duopoly and that will only happen with a lot more dev work.
At any rate, I think this funding round shows that people will be getting their phones. The question is how fast and how many people will be working on the software.
$1,262,000 beyond the goal.
This morning’s email says they are up to $4.3m in total investment (i.e. $1.8m from this series).
I do not understand the legal texts but I think that it mainly says: Throw your money into a big black hole and forget about it. Be sure that you can afford to lose it. Possibly in the future you can get it back including a small percentage but do not count on it.
That is exactly what I did several years back and to my astonishment I am now holding my Librem 5 and it is working. Of course there is a lot to do about the software but I have been using Linux since Linus first published it so that is not different at all. I was mostly worried about the reception because we have a weak field here but it is really quite good.
Considering this I might throw away more money in that big black hole …
And once again - thanks to the Librem people for providing me with a working Linux phone which is perhaps the safest you can get today.
That is part of the logic of requiring an “accredited investor” - although that really applies to any investment: if you can’t afford to lose the money that you are investing then you probably shouldn’t be investing.
Plus, shares in the company.
Yeah ! Next Microsoft 
Or you might get your capital back. At this stage there are scenarios where that would be at Purism’s discretion and scenarios where it wouldn’t be. That’s how Convertible Notes work. Sometimes they convert into shares. Sometimes they don’t (and you get your capital back instead). In either case there is recognition of the value of the accrued interest amount (and you would have to read the details to see the ways in which that might be ‘paid’).
I should ask them to not send these to me any more. My usual thought is “Send me my damned phone, then we can talk.”
These emails make me even more annoyed than I already am. The only thing I want to hear from them is a shipping notice, until then stop cyber begging and get back to work in the phone factory.
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I get how that works, the point is sending out investment emails to people you owe late product to cannot be considered a good move.
These two things are actually connected. They probably cannot ship the phones due to the problem with the supply chain and perhaps with finances. When people invest, they make it more quick to get the phone for everyone.
No, I actually have a Librem 5 on my desk, from a friend who ordered earlier then I did. But of course, investments bring risk.
I’m not an investor.
I think that the “accredited investor” requirement is designed to protect an unsophisticated public from being taken advantage of by criminals. Without it, anyone who can tell a good story can fleece the public with good sounding lies, and take their money. Then the public can claim that they were tricked and that the government shouldn’t allow that to happen. But if you’re an accredited investor, the government can respond that you are a sophisticated investor and that you should have known better than to allow yourself to be taken advantage of, by relative amateurs. It’s like if a seasoned real estate broker allowed himself to be taken advantage of in a real estate transaction, by someone who didn’t graduate high-school and who had never owned real estate before. Shame on that broker. Robert Kiosaki has written about some extremely good investment deals that made him wealthy and that are only available to accredited investors. Esentially, there are deals out there that only the wealthy can invest in. It’s the saying that the ritch get richer in a game that you have to be ritch, just to play in the game. The poor and uneducated always lose in those games. So there are laws to protect them.
Publicly traded stocks are different. The numbers are all published and theoretically, anyone can learn how to evaluate each trade based on its merits.
After I had waited on my Librem 5 for a while and realized that it wasn’t going to be shipped any time soon, I realized that crowdsourcing is a method for companies to skirt the Securities and Exchange Commission laws that should keep companies from selling higher risk investments to unaccredited investors on a large basis. Perhaps the SEC is allowing it to occur because there are some merits to it. But it may actually be illegal in the US, just not ever prosecuted.
The way that Purism keeps everything a secret from its customer/investors, perhaps should be illegal for these reasons. I would never invest in a company that won’t show me a balance sheet and financial statement. As a customer who placed a pre-order, I was tricked by Purism. Every article that Purism publishes that doesn’t disclose the broken promises of the past and that is currently grossly late shipping is deceptive and exploitive to the public. You don’t realize that SEC rules to protect you are being ignored in the crowdsourcing process. You don’t know about information that Purism is hiding from you and that is being used to entice you to take a risk without having a reasonable amount of information about the risk. They just promote their product as though it has already been funded. It can take you a few years to realize that you were taken advantage of and that the known risk was higher than what you were led to believe it was. I suspect that Todd’s biggest challenge comes from how to spin the next story or excuse, to keep the level of risk involved hidden from everyone who might place a pre-order. This is all immoral.