Mostly the deal falls apart, the company seeking investment can't get it (timely) - and may have to start all over (6mo process).
Another outcome was that the folk buying in had to buy out the non-RegD parties - and crushed them on the price so those investors got a better price, the fraudulent actors didn't see the gains they thought, the company now has more % owned by new investor group than originally thought (which changes the control balance) and the founders are grumpy and distracted and mad at folk they thought were cool (and all that has a down-pressure on productivity while everyone involved gossips for a few weeks)
Edit: of you're getting your FFF round, it's all private, that group can be unqualified and you mark the deal as a Loan, so when you raise your Angel round you'll pay them back, or start the payback - and let the Angels know that's happening. Part of the investment to service debt.
djbusby|4 years ago
Another outcome was that the folk buying in had to buy out the non-RegD parties - and crushed them on the price so those investors got a better price, the fraudulent actors didn't see the gains they thought, the company now has more % owned by new investor group than originally thought (which changes the control balance) and the founders are grumpy and distracted and mad at folk they thought were cool (and all that has a down-pressure on productivity while everyone involved gossips for a few weeks)
Edit: of you're getting your FFF round, it's all private, that group can be unqualified and you mark the deal as a Loan, so when you raise your Angel round you'll pay them back, or start the payback - and let the Angels know that's happening. Part of the investment to service debt.