As equity crowdfunding portals emerge to fill every void and cater to every niche in the alternative financing arena for startups, many in the industry are discovering that moving other people’s money around is a complex procedure, especially where investments are concerned. Not only do you have state and federal regulatory agencies scrutinizing every particular but investors and issuers want to know that things are secure and going through the proper channels. Finding a reputable bank to handle these transactions has not been easy either. Most banks weigh the risk they’re assuming with the fees they’ll be able to charge and decline to participate in this new environment. Add to all the uncertainty, the very real prospect of having to return funds to investors if a fundraising goal isn’t met or other scenario requiring special systems and you begin to understand why banks aren’t lining up. Is there no willing bank out there that has this stuff figured out?
GoldStar Trust Company, owned by Happy State Bank, has launched CrowdPay.com, an escrow, payments and self-directed IRA solution for crowdfunding portals. Happy State Bank was established in 1908 (Happy, TX) and is a 4-star rated financial firm with over $2.6 billion in assets. Crowdpay is specifically designed for platforms raising capital under rules 506(b) and 506(c) plus any intrastate exempt platforms that are in need of escrow, payments, tax reporting and other back-office services. Once final rules on Title III and Title IV are in place – CrowdPay will be ready to handle potentially very high transaction volumes in that space as well.
GoldStar Trust brings experience to the table. As a bank, trust company and self-directed IRA custodian in one, Goldstar has the credibility earned from over 20 years in business, over 37,000 IRA accounts and almost $2 billion in assets under management. CrowdPay provides the know-how to securely collect funds, open escrows and process payments back to investors, even allow investors to fund their crowdfunding investments through a self-directed IRA right on the portal. CrowdPay is an API-driven application that is intended to integrate with any platform.
Goldstar can support offerings with various deal structures be they equity, debt, revenue sharing, convertible notes, etc. It really depends on the needs of the platform. Automating services for crowdfunding is the perfect evolution for a company that can boast years of success.
GoldStar Trust Company President, John Johnson explained;
“The banking industry has a justifiable reputation for hesitancy towards change. Goldstar views the changing environment as an opportunity to expand our footprint in a business we know very well. With more services moving online and capital-raising dynamics shifting with it, Goldstar wants to be part of this change and not become antiquated as a result of it. We already have the in-house systems, knowledge and track record of success – something many new crowdfunding portals really need.”
CrowdPay is not an outsourced application but ties in with GoldStar’s proprietary investment and IRA software – all of which was developed in-house by a solid development team.
How it works
Once an offering goes live, CrowdPay creates a sub- account for each Investor in an offering. Funding is via ACH, wire or IRA rollover/transfer. Funds are then moved to the escrow account for the specified project. If the offering meets escrow, funds are released to the Issuer’s business account. If the issue fails to meet escrow, funds are returned to the Investors’ CrowdPay accounts to either be withdrawn (ACH’d to their checking account) or better yet, reinvested in another offering. CrowdPay wants to make it easy for an investor to reinvest.
Interest, dividend, royalty payments, etc. paid by Issuers, are automatically sent to each Investor’s CrowdPay account and/or IRA. The funding portal has direct access to all necessary account information.
CrowdPay supports equity crowdfunding and other investment-type portals for accredited investors nationwide and Texas intrastate crowdfunding portals that will open up crowdfunding to unaccredited investors within state lines. The system works behind the scenes via API to open and fund investor accounts as part of an often required escrow process. Dividend and interest payments will also be paid to these investor accounts when applicable, keeping everything within CrowdPay’s ecosystem and making it easy for investors to reinvest. Investors can also choose to open a self-directed IRA and invest that way through an IRA transfer or rollover or by contributing up to $6500 to open a new IRA. CrowdPay.com is a website for portals and developers that details the process and makes API documentation available.
About GoldStar Trust
GoldStar Trust Company is one of the nation’s leading Self-Directed IRA custodians with over twenty years of experience and is the first bank in Texas to provide a working escrow solution approved by the Texas state security board for crowdfunding. GoldStar offers unique retirement solutions that allow investors to diversify their IRA portfolio with precious metals and other alternative investments. GoldStar serves as Paying Agent and Trustee for issuers of church bonds and municipal bonds in 38 states; serves as custodian for more than 37,000 IRA accounts with total assets of more than $1.9 billion (as of March 31, 2014).
GoldStar Trust President, John Johnson may be reached via email at: email@example.com