For investors who have put money into the companies marketed by First Asia Alliance, any recourse to legal action will likely be protracted, even painful, said corporate lawyer Robson Lee.

"It would not be cost-effective to start any legal action to recover the investments made in the investee companies, especially if they are no longer solvent, in liquidation, or already wound up," Mr Lee, a partner at Gibson Dunn, told The Straits Times.

"These investments should be treated as sunk costs," he said, noting that taking legal action will incur only more time and money without any guarantee the investors will be able to recover what they are owed.

Mr Lee said the failure of these firms highlight the need for investors to be careful when investing in crowdfunding projects.

"Failed investments in start-up ventures are par for the course."

Investors must "fully understand what you are in for" before committing to an investment, he said.

One easy - though not foolproof - way is for investors to check via the Internet if there has been negative publicity or bad press on the company or people managing or controlling the operations.

In the same vein, Mr David Gerald, president of Securities Investors Association (Singapore), said that for any kind of investments, it is crucial that investors "know the company well, its business, who is running it, their background, and the future of the company".

He believes that crowdfunding is "not really suitable for small investors because of the very high risk" it carries, which means there is a possibility that investors could lose all their money on such investments.

Jacqueline Woo