Paid Ghost PR Firm That Took Aim at Legion M Busted for Securities Fraud
Sometimes real life really is crazier than fiction.
The equity crowdfunding world is pretty small, niche, and not necessarily well known. Apparently, it’s still well-known enough for bad actors to hire a ghost PR firm to relentlessly harass a well-known company in the space in an effort to deter investors. Now, a lot of this is speculation and opinion on my part, but I’ll tell you what I know, and let you decide.
Legion M is a film investment company that essentially pools investors funds, then uses their knowledge and resource to invest in various media. This might be producing a film, helping fund a project in hopes of a return, or something more. Their claim to fame, however, is being the first fan-owned entertainment company as they now have over 35,000 investors.
This all started a few years ago with Legion M starting a typical equity crowdfunding raise on Wefunder. This one was actually quite different than most others, however. They became inundated with trolls, spam accounts, misinformation, and relentless attacks across social media platforms like Reddit, Facebook, their campaign page comment section, and tons more. For a startup, this is not something you expect in the slightest. In fact, most people don’t even know about you, more or less becoming so involved that they feel the need to make tons of fake accounts and spend hours every day going across various social media platforms to harass your startup and their investors.
This came as a surprise to the Founders as well. Like most, they were hoping this was their run-of-the-mill internet troll and would eventually forget and leave them alone. However, this actually persisted for YEARS, and some of the fallout is still happening to this day.
After a while, they wanted to find out why this was happening to them, and the story goes that one of their dedicated investors actually reached out to them and volunteered to do some research. Surprisingly, these trolls didn’t hide their trail very well, and Legion M was able to track it back to one person, Lawrence Meyers. Legion M wrote a blog about this, compiling all of this, outlined here.
They compiled the various evidence, and put that in a blog in an attempt to deter future trolling, generally to no avail. The article outlines his experience as, well, this:
My Experience
Personally, I entered the scene a few months ago once Legion M opened their first round on StartEngine. I was one of the first people to comment, asking a few standard questions about investing in the company before ultimately making an investment. Jeff answered promptly… followed by someone named “Annalisa,” subsequently making some rude and incorrect comments and accusations about the company. I didn’t think much of this
at first, but then this persisted… for months. Every single comment was met with replies by Annalisa, William, Rolland, and tons of other accounts with 0 investments on StartEngine, and some obviously fake names like “JeffNPaul Suck.” Ultimately, several of these accounts were deleted but were promptly replaced with more fake accounts. Some of these accounts commented as much as a dozen times a day, with several comments and replies to every single question asked. Personally, I didn’t want to get involved, but my email would receive as many as 15 alerts a day from these fake accounts spamming my comments with malicious comments, insults, and misinformation.
As I got involved, I was equally as confused why someone would spend most of their day, every day, for months in the comment section of an early-stage companies investor's comment section or trolling them on social media. I personally remember seeing several comments on Christmas Eve and Christmas day as well. I can understand disgruntled investors making negative comments or the occasional troll comment, but spending the majority of your life for months was just…mind-boggling. This being a paid PR firm, eventually started looking significantly more likely. While it’s going to be hard to actually prove this without a formal lawsuit and discovery, there are a few things that are pretty telling.
Some Proof/Indications
The biggest indicator for me that this was actually a paid ghost PR firm was after months of non-stop comments and blowing up my email… one day, it all stopped. Again, this was months of non-stop harassment including on holidays. Why did it stop? Well, we can’t be sure, but it just so happens that on the day that the comments and harassment stopped… there was an SEC lawsuit against Lawrence Myers for securities fraud.
It had been a month and a half since that lawsuit had been filed, and from day 1 of the Legion M raise, there were dozens of comments a day, including on Christmas. This lawsuit was filed on December 29th, and after December 29th, nearly two months later, basically none of those accounts have made a single comment since then and things became mostly quiet. Personally, that is one of the biggest indicators to me that this individual was involved in this scheme, despite it only being circumstantial.
Either way, whoever this person was, it’s pretty much undeniable there was 1 person running multiple accounts. In fact, in at least one instance, they accidentally replied before logging into their alt account.
Further, these people did happen to leave enough of a trail behind so that it could be traced back to them, and other evidence outlined by the Legion M blog above. There are millions of places where research could have ended up, and the fact that someone was able to trace it back to this one person seems like, again, some pretty strong circumstantial evidence.
Legal Issues
One of the biggest issues here is the fact that investors in Equity Crowdfunding are required to have these comment sections to publicly address investors' concerns and, frankly, call out sketchy things within an offering or company. This means that if they simply deleted these fake accounts, they could actually face legal liability from the SEC. CrowdCheck, one of the leading Equity Crowdfunding law firms, addressed this in a recent blog, ultimately concluding that it was ok to delete these troll and tout accounts. Granted, that means these accounts must be confirmed to actually be troll accounts, not just dissenters.
That blog is indeed addressing the exact ‘Annalisa’ from the picture above, whose account was ultimately deleted. Since the SEC has a strong interest in ensuring that mere dissenters of a stock, or people trying to expose something about a security being sold aren’t silenced, this is an uphill battle. Unlike Reddit or Facebook, where they have full control over silencing people on their platform, these crowdfunding portals are governed by the Securities Act and several other laws, meaning they don’t have this luxury.
However, under Section 17(b) of the Securities Act, if you receive money from an issuer of a security to simply describe any security for sale, and you don’t disclose that money received, you are in breach of this provision. Meaning if Apple pays you to describe Apple stock, you need to disclose that. This is an exceptionally broad provision, and ultimately is what caught Mr. Lawrence Myers (although these were on charges unrelated to anything Legion M.)
Conclusion
This whole scenario just seems wild to me, and it leaves open a lot of questions too. For example, who was paying this firm to go after Legion M, and why? Ultimately, we may never actually know if Lawrence Meyers was behind it specifically, or to what extent he was, nor who paid who to do this to Legion M.
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