Equity Crowdfunding Controversy: DealMaker Sues Rival Issuance Alleging Breach Of Contract, Trade Secret Theft And More

Equity crowdfunding is a relatively new market, but that isn't stopping the heated competition. 

One of the largest equity crowdfunding white-label services — DealMaker — announced a lawsuit against rival Issuance Inc. in January. After rulings on the pretrial motions, the U.S. District Court for the Central District of California ruled the lawsuit can proceed. 

Issuance CEO Darren Marble is the executive producer of "Going Public," a popular startup investing show that allows investors to invest in startups while watching the show.

DealMaker is a white-label technology company looking to bring technology to the capital markets. Private capital markets traditionally conduct transactions behind closed doors with no access to the general public. DealMaker creates the backend technology for companies of any size to raise funds on their terms and allow companies to accept funds from their supporters, customers and stakeholders.

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DealMaker filed a complaint in February alleging violations relating to breach of contract and trade secret theft. In the complaint, Marble allegedly approached DealMaker under false pretenses in an attempt at a partnership. DealMaker would be the backend technology solution investors would use when investing while watching "Going Public." 

The complaint alleges Marble opened up various raises over the course of months but never raised any money. As part of this, Marble got "full administrative access" to DealMakers technology and trade secrets. This showed, among other things,"instructions to digitize the subscription agreement terms, complete payment processing integration, link to the offering site using embeddable flow, track subscribers and finalize the subscriber onboarding questions."

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After obtaining the required information, Marble terminated the agreement and then publicly announced the release of Issuance, a DealMaker competitor. 

In a statement to Crowdfunding Insider, Marble stated:

"As DealMaker knows, the claims in this lawsuit are entirely without merit. We look forward to our day in court and winning. Issuance has been experiencing rapid growth as a result of delivering a superior product at a discount to the market. 

"We pioneered our own technology that allows retail investors to seamlessly check out for securities in under a minute, with Apple Pay and Google Pay as payment methods, driving better outcomes for our clients. 

"In addition to our industry-leading Reg A+ product, we recently launched a Reg D 506(c) product which has been quickly adopted by both U.S. and Canadian issuers seeking to raise growth capital quickly and efficiently. 

"We look forward to expanding our market share and continuing to deliver an investment platform that delights both issuers and investors. The Pieta was a real deal."

The complaint requests injunctive relief directing defendants to delete and destroy confidential information and monetary damages associated with any damages. 

On June 27th, DealMaker released a follow-up press release stating the lawsuit will be progressing to trial.

When reached for comment, Marble further clarified:

“5 of 6 of their claims were dismissed on their face.” Noting that while the lawsuit will progress, most of the claims were ultimately dismissed prior to trial and clarified some discrepancies in the complaint.

Marble further noted the lawsuit might not tell the whole story. “Issuance already had a platform in market… We upgraded our MVP in November 2022 with Issuance Express.” And said the raise in question, ‘Pieta,’ was “a real deal. We unveiled the sculpture in Las Vegas with Steve Forbes. It was in no way a sham deal.”

While the outcome is still unclear, the competition is certainly heating up.

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