VENTURE CAPITAL CULPABILITY: POTENTIAL LIABILITIES FOR VENTURE CAPITAL INVESTMENT OF FRAUDULENT PORTFOLIO COMPANIES

Authors

Calzia, Kyle D.

Abstract

Due to the possible detrimental effects of broadening liability for venture capitalists, any change would need to balance the dangers of limiting economic growth with the public policy motives of protecting shareholders. An expansion of securities law in Section 10b and Rule 10b-5 could open venture firms to liability as aider-abettors to securities fraud, specifically when venture firms continue to offer financial or directional assistance after having reason to know of securities fraud by their portfolio companies. Additionally, stricter examinations of agency relationships and director duties that are required from venture firm partners that sit on portfolio boards could see liability imposed via this secondary theory. While venture firms continue to invest billions and make even more, shareholders and consumers suffer in the wake. Courts need to draw the line and hold the negligent actors accountable.

Recommended Citation

Calzia, Kyle D., VENTURE CAPITAL CULPABILITY: POTENTIAL LIABILITIES FOR VENTURE CAPITAL INVESTMENT OF FRAUDULENT PORTFOLIO COMPANIES, 40 Santa Clara High Tech. L.J. 331 (2024).
Available at: https://digitalcommons.law.scu.edu/chtlj/vol40/iss3/3