SEC accuses crowdfunding firm Netcapital of inflating revenue by 345 percent

The SEC says crowdfunding firm Netcapital booked nearly $14 million from consulting deals with startups that an insider secretly controlled. 

That is the heart of a complaint the Securities and Exchange Commission filed on August 10, 2026, in federal court in Massachusetts. The defendants are Netcapital Inc., a Nasdaq-listed company that runs an SEC-registered portal for small businesses raising money online, along with five people tied to it. 

Here is how the filing tells it. Netcapital has a consulting arm, Netcapital Advisors, that helps startups prepare for crowdfunding raises - logos, pitch decks, websites, business-plan advice, investor introductions. The SEC alleges the arm signed deals with at least eleven startups, each agreeing to pay between $1 million and $2 million, paid in equity because the startups had little cash. The complaint alleges those startups were secretly controlled by John Fanning, who the SEC says acted as a Netcapital officer while the company labeled him only an "advisor." 

The catch, according to the filing: the SEC calls the agreements "shams." It alleges they produced no real revenue, that some were forged, and that all were backdated. Booking that revenue, the complaint alleges, "inflated Netcapital's Relevant Period revenue by approximately 345 percent." 

For anyone running a practice, the revenue-recognition piece is the one to sit with. The SEC alleges Netcapital started counting revenue from the date printed on each agreement even when the agreement did not yet exist - in some cases booked months before a signature. About $5.1 million of the roughly $13.9 million in consulting revenue, the complaint alleges, was recognized in periods when no agreement existed at all. 

The related-party thread matters just as much. The filing alleges Fanning is married to Netcapital's chief financial officer and controlled the startups through intermediary companies, which it says typically each stayed below the 20 percent ownership line that would have triggered a disclosure requirement under the crowdfunding rules known as Reg. CF. The SEC alleges the company never told investors the consulting revenue came from related-party deals involving Fanning. 

The complaint centers on a handful of roles: the chief financial officer, two people who served as chief executive over the period, and a certified public accountant who the SEC says ran revenue recognition and prepared the financial statements. The filing alleges the CFO, the CPA, and one CEO knew of or recklessly ignored the alleged scheme, and that the earlier CEO was negligent. 

Then there is the records trail. The filing alleges Fanning used the encrypted app Signal for company business and did not hand those messages to the Commission despite a subpoena. It also alleges one CEO deleted Signal from his phone in 2025 while aware that FINRA and the SEC were investigating. 

The SEC says investors put more than $25.6 million into Netcapital's public and private offerings while the revenue was overstated. It is seeking permanent injunctions, repayment of alleged gains with interest, civil penalties, and bars on serving as an officer or director for several defendants. 

The allegations have not been tested in court. The defendants have not filed a response, and no court has ruled. The complaint reflects the SEC's allegations.