SEC Charges Founders of a Real Estate Crowdfunding Portal with Fraud
Litigation Release No. 24288 / September 26, 2018
United States Securities and Exchange Commission v. William C. Skelley and Sohin S. Shah, Defendants, Civil Action No. 18-CV-8803 (S.D.N.Y., filed September 26, 2018)
On September 26, 2018, the Securities and Exchange Commission charged the co-founders of a New York-based crowdfunding portal with misappropriating more than $1 million from investors.
According to the SEC's complaint, New York resident William C. Skelley and New Jersey resident Sohin S. Shah, the co-founders and senior executives of iFunding LLC, raised more than $3 million from 42 investors in 17 states, with fraudulent claims about iFunding's plans to use the funds to build an online real estate equity crowdfunding portal. The complaint alleges that Skelley and Shah in fact diverted more than $1 million of investor funds for their personal use. The complaint also alleges that Skelley made materially false and misleading oral statements to investors and, in a later period, iFunding LLC and Skelley used two private placement memoranda to solicit investors that contained false statements about the use of funds and misrepresented the number of real estate projects that iFunding had financed, and the amount of funds that had been raised on iFunding's portal.
The complaint alleges that Skelley violated antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 (the "Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder, that Shah violated Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. Further, the complaint alleges that Skelley and Shah are each liable as a control person of iFunding, LLC and iFunding Holdings under Section 20(a) of the Exchange Act for the two entity's violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder.
The SEC's complaint seeks injunctions, the return of allegedly ill-gotten gains plus interest and civil monetary penalties against both defendants.
The SEC's investigation was conducted by Ruta G. Dudenas and Luz M. Aguilar of the Chicago Regional Office. The case was supervised by Amy S. Cotter. Doressia Hutton and John E. Birkenheier will lead the litigation.