Wiring investor capital to account controlled by searchers directly

October 20, 2023

by a searcher from Harvard University in Boulder, CO, USA

I'm a self-funded search investor and so far I've always wired money to an escrow account controlled by a legal team or a bank until close. I'm doing a deal where the wiring instructions tell me to send money to an account controlled by the searchers directly. Curious if others have seen this and if it would be a yellow flag or is common practice.

Thanks,
Kendall

Reply by a searcher
from Harvard University in Boulder, CO, USA

Thanks to all who commented. There wasn’t legal language around refunding money if the deal didn’t close. I trusted the searchers just wanted to cover my bases. The searchers ended up opening an escrow account for me to wire funds to (it had always been their plan to do an escrow acct anyway, just crossed wires between them and the bankers and by the time I flagged it the majority of capital had already been sent to the original account).

Reply by a searcher
from Northwestern University in New York, NY, USA

If you know the deal is near close and there are clear docs that say there is a refund it the deal doesn't close, this isn't a yellow flag. In my deal, we had the wires in a bank account controlled by me a few weeks before close.

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