What are my rights/responsibilities regarding investment capital?

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What are my rights/responsibilities regarding investment capital?

I am producing an independent film. I have an investor from out of state who gave me a lump sum of money via check. We did not sign any contract between ourselves. This money has since been spent on our pre-production costs. The investor has recently contacted me demanding their money back and is threatening to take me to court. Is this possible/legal?

Asked on November 10, 2012 under Business Law, Ohio

Answers:

Ross Meador / Meador & Engle

Answered 9 years ago | Contributor

Though it is too late now, you should be aware that fundraising from investors may be subject to state and federal securtities laws.  Your problem might have been avoided if you had given the investor proper disclosure documents and registered the offering with the state and SEC.  These steps might sound onerous, but in fact it is not difficult to do.  The fact that you did not could mean that the investor has a right to the return of his money (all depending on the specific facts, of course).

Richard Bryans / The Bryans Law Office

Answered 9 years ago | Contributor

The circumstances you have described raise a number of potential legal issues, variables and outcomes.  It is certainly possible/legal for you to be sued for the money under one or more theories, including but not limited to theft by deception which, in Colorado, can result in a damages award to a plaintiff of three times the amount in controversy plus court costs and attorneys' fees.  Investors, by definition, do not simply give money away like philanthropists; investors generally expect to receive a return on their investment which exceeds to some degree the amount of principal invested.  At the very least, you could be pursued in court under the common law theory of money had and received.


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