SEC brings first case of crowdfunding fraud
The United States Securities and Exchange Commission has filed its first lawsuit against promoters of crowdfunding offers, alleging that three people defrauded investors over $ 1.9 million.
In a civil lawsuit filed Monday, the SEC said Robert Shumake and his associates Willard Jackson and Nicole Birch conducted two fraudulent and unregistered crowdfunding offers that they were marketing as an opportunity to invest in cannabis-related real estate. .
Among other things, according to the complaint, the three defendants did not disclose Shumake’s criminal history and embezzled more than half of the funds they raised from investors for their personal use rather than to acquire real estate. and rent them out to cannabis producers.
The SEC also accused the crowdfunding portal TruCrowd and its CEO, Vincent Petrescu, of allowing the offers to proceed despite knowledge of “several warning signs of possible fraud or other harm to investors. investors â.
âCrowdfunding offerings allow issuers to cast a wide net for potential investors, emphasizing the importance of full and honest disclosure,â said Gurbir Grewal, director of the SEC’s enforcement division, in A press release. âAs companies continue to raise funds through crowdfunding offers, we will hold issuers, custodians and individuals accountable and enforce the protections in place for all investors. “
Michigan businessman Shumake was sentenced to 18 months probation after pleading guilty to illegally collecting upfront fees from clients of his mortgage auditing firm, according to the SEC.
While still on probation, he reportedly “began taking steps to raise funds from the public to enter the cannabis industries,” creating Transatlantic Real Estate LLC and enlisting Birch, a lawyer from Georgia, as nominal CEO .
From September 2018 to May 2019, Transatlantic raised over $ 1 million from crowdfunding investors. Shumake and Jackson raised an additional $ 888,180 through an offer of 420 properties from May 2019 to June 2020.
“None of the funds raised in either offering were used to acquire or improve cannabis-related real estate,” the SEC said. “None of the investors in either of the crowdfunding offerings received any return on their investment, and few investors got back the funds they invested.”
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cannabis, crowdfunding, Robert Shumake, US Securities and Exchange Commission