Legal Review - AMEX Dispute - More info needed

Hi Curve

I have received the material from Crowdcube for review. Specifically, the Legal Review.

It states “From time to time, payments networks have claimed that elements of its business model are not consistent with these rules, and although Curve operates within the regulatory landscape, the payment card networks set and interpret the card operating rules. Curve is engaged in active
discussions with these payment card networks in order to avoid impact to Curve’s customer offering. However, if such claims are not resolved, they may result in fines or require changes in its business practices that may be costly or have an adverse affect its business.”

I assume this relates to the ongoing dispute with AMEX but so that I can consider further what sort of risk this dispute poses to my proposed investment, please can you address the following queries:

  1. How many ongoing indivudal disputes do you face;
  2. How many claims/demands of the same of substantially the same nature have you faced historically:
  3. What is the value of the claim(s);
  4. Have proceedings been issued? Arbitral of Civil;
  5. If Civil Proceedings have been issued, what is the claim number and in which Court?
  6. If Arbitral proceedings have been issued who is the Arbitrator and when is the Final Hearing listed for;
  7. If proceedings have not been issued, what is the status of settlement discussions;
  8. Have you instructed Leading Counsel, if so who;
  9. A summary of Counsel’s opinion on the merits and propsects of success;
  10. Is there a counterclaim, if so for what;
  11. Counsel’s opinon on the merits of the counerclaim.
  12. When you say there may be an adverse affect on the business, can the business afford to trade through any adverse finding or would it have to cease trading.
  13. What jurisdiction are the disputes subject to.

I am content for you to provide to me this information privately and, if approproiate, subject to an NDA. However, this is crucial. Any institutional investor would be entitled to investigate the dispute before investing. I see no distinction between the level of due diligence and access to information which an institutional investor would have access to than a lay person investor.

I await your prompt repsonse given Crowdcube requires my confirmation within 7 days.

Kind regards

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As it says networks I also do not think it is only AmEx:

I did read the whole document.

I’m not surprised that the shareholder rights differ from those agreed with institutional investors. I don’t know enough about what is considered the ‘norm’ in these crowdfunding scenarios to consider if that is acceptable or not.

Right now, however, I am concerned that Curve considers its dispute with the providers significant enough to declare it on the Legal Review. One assumes the dispute is subject to English law but if, for example, AMEX has a US jurisdiction clause then I’m out. The US legal/regulatory system is too unpredictable with damages in civil suits vastly disproportionate to the breach.

What is more interesting is that Curve don’t seem to want to answer the difficult questions. Given the significant increase in civil claims against fund managers/brokers etc in recent years for damages arising from poor performance and misrep, I’d have thought it was in Curves’ best interest to be transparent. Especially as this is only a small proportion of its funding and yet there are 9,000+ people who will be affected.

Finally, i had taken some comfort previously from the fact that institutional investors were aboard and no doubt they did do their due diligence and get access to a greater volume of material. However, noting their protection in the review, that comfort falls away.

I’m content to accept this is a modest risk punt. If, however, it’s high risk as a consequence of something Which Curve does or ought to know, and it’s in its gift to tell me, then I want to know.

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Well thought out questions, also very interested to see the responses.

Hi Mike @ms2005
Appreciate your question and I can tell you are a professional.
As Crowdfunding investors we don’t even know Curve’s revenue. You are not going to get answers to those questions. To be fair, in most crowdfunding rounds you wouldn’t get these kind of answers either. The kind of information you get is usually very basic, and is aimed at typical retail investors who don’t even know what a share is or how private market transactions work.
Best,
Fabian

That is incorrect. On Crowdcube most of the pitches have more information about the financial and legal side of the business. Curve is really a negative example and not the norm. I am only speaking about Crowdcube though.

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As a lawyer, I entirely agree that these are highly pertinent questions.

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And I would agree with what you’ve said too.

(Following) This is crucial information for all of us. I am surprised by your response Fabian or Flabian? Curve need to respond to difficult questions and I would have thought they would be in a ready state to do so.

What is interesting is that Curve is comparing itself to Monzo. Leaving aside the fact that they are entirely distinct products, one thing Monzo did do was be transparent in its financials.

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Hi Ryan, Oh I believe they should respond and address this question. The same way as I believe they should also disclose some basic financial numbers. But since they haven’t done the later I don’t believe they will do the further. Again not saying this is a good thing - and I am questioning my investment as well. I believe the product is great and has great potential (especially with expanding to the US) but it could profit immensely from more transparency.

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We are working to bring Amex back to Curve. Please bear with and keep making your voices heard.

We want to include you in everything, and keep you as informed as possible, however, showing every detail will mean giving up our competitive advantage. We will strive to be as transparent as possible.

With the new regulations within banking and payments over the last few years, Curve has been able to lead the disruption of personal finance to simplify it for our customers. We’ve shown there’s a space for us in the market and customers have responded by embracing the Curve product, which is why we’ve become relevant for incumbents.

If it was easy, straightforward, and comfortable, there would’ve been 50 Curves out there already. We are not a bank, we’re not following a blueprint, we are unique in the market. Curve is an innovative business that is disrupting the old ways of doing things in the payments industry. This is one of the many reasons that we have the backing from leading institutional investors, including those that have joined us in our recent Series B funding.

For any additional questions related to our Crowdfunding, please do contact crowdfunding@imaginecurve.com.

Marie

I am grateful for a response but, with respect, what you say is no more than Politician speak; it’s a lot of words with no substance, focus or purpose.

At present, I’m not interested to learn if you’ll bring AMEX back, I’m interested to learn if the dispute with Amex will bring an end to Curve. That depends on Curve’s financial status, the terms of its institutional investors shares etc. But, importantly, it’ll depend on the true value of any claim/counterclaim.

You are not talking to the man in the street. Many of the people investing will have professional backgrounds. Many will understand complex financial and/or legal issues. To those that do, why can’t you offer up more information?

Precisely what competitive edge are you abandoning by confirming, for example, i) whether proceedings are afoot; and ii) whether the dispute(s) are subject to US jurisdiction. Indeed, I find it difficult to imagine any competitive edge can be preserved by refusing to provide factual details about the dispute. For example, what is the value of the dispute?

If proceedings are afoot it’ll be a matter of public record.

Is Curve saying that it has not declared to any institutional investor the scope of any dispute(s) and /or that none have asked?

You are asking investors to believe in the brand. Have faith in its path and its ability to monetise a rapidly changing market. That trust must be earned. At present, it feels like Curve is taking the crowdfund community for fools. That, or it doesn’t actually care about its community; those that want to ask difficult questions can leave, those that don’t or are content to have a punt, can stay.

May I, please, ask you revisit the position and provide what information you can.

Regards,

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Hi Marie

Thanks for taking the time to reply. Unfortunately, it’s not really an answer, but just more marketing nonsense. It doesn’t even touch on some important points that people have raised.

It seems clear that this is the extent of information that Curve are willing to provide. That’s a shame. I feel that at this point, with the information available, even a small investment would be irresponsible.

Several have tried and gone bankrupt. Hence why investing in Curve based on virtually no information seems irresponsible.

On terms under which they (a) get back their initial investment plus 6% before crowdfunders get anything, and (b) are entitled to more shares, effectively lowering the company’s valuation, if Curve don’t hit targets. These investors had more information and took a lower risk than crowdfunders.

This sums up my feelings perfectly. At least it makes the decision to cancel my investment a simple one.

PS. Please don’t take this personally @Curve_Marie . I realise you’re just the messenger.

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Hi @ms2005

Thank you for reaching out. I understand your questions and concerns.

Unfortunately we’re unable to share more information either because of regulatory restrictions or competition. One of the reasons our crowdfunding campaign followed the Series B in terms of both timing and valuation, is because we wanted our customers to benefit from the confidence that expert investors have reviewed the company, did their due diligence and agreed a price/value.

It is common practice that the lead investor does the deep dive and others follow with varying levels of DD, depending on the risk they’re taking (e.g the money they’re investing). In addition, Crowdcube have their own regulatory obligations and produce the Legal Review to give crowdfund investors more information.

It’s worth noting that we aren’t the only disruptor that has benefitted from more progressive regulation to use existing payment networks to bring a better product and experience to customers - and make similar disclosures around the challenges of operating in an environment where other companies set and operate the rules (see for example disclosures Paypal make each year in their Annual report, eg para 3 of page 12 of its 2018 Annual Report https://investor.paypal-corp.com/static-files/a3a709e0-7c03-4912-b0fe-0872e4fed100)

Unfortunately, for the reasons set out above, we are unable to provide you with the same level of diligence as Series B investors who invested millions of dollars. You will need to make your decision based on the information provided to you on Crowdcube, the knowledge that professional investors have recently done their diligence and invested, and your experience with the product.

This argument would hold more water if the expert investors weren’t getting such strong liquidation preferences and additional share rights based on performance targets. The fact that Curve had to grant those suggests that those expert investors wouldn’t have invested at the valuation that we are getting on the terms we are getting (I’m sure you wouldn’t have given up extra share rights if you didn’t have to).

Anyway, I’ll stop annoying you, as it’s not going to change anything now. Good luck to those who choose to invest.

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I’m not sure this is worth very much - the pitch deck has Curve comparing themselves to Monzo, and letting people infer there’s a x% chance they become as big as Monzo have. If you’re investing in a hundred different companies investing in a ‘long-shot’ makes a lot more sense if you’re just investing in one company a year.

I couldn’t agree more. Well put and about time someone said it.
Unfortunately Crowdfunders aren’t always clued up on risks. Contributing very small amount is best, given that Loot, Glint and a few others in Fintech world are in administration just because you managed to grab peoples money doesn’t mean you are safe.

The Amex situation is just silly now. Curve will not get Amex support that’s pretty much obvious and Curve of course aren’t willing to be open about this. Perhaps looking into other payment providers such as Diners, Maestro, JCB etc. would hold better chances.
I have had report that most cashback cards are refusing to award cashback on Curve purchases. Claims for example Tandem Mastercard Credit Cashback will not pay cashback if used Curve etc. Can anyone confirm if any cashback cards pay if Curve is used.

I have used Curve with multiple cashback/rewards cards, including Tandem. Never had any trouble getting the cashback/rewards. The only issue is retailer-specific rewards - eg. getting extra points for using the Tesco credit card at Tesco. You don’t get them as the merchant you’re paying is Curve, not Tesco.