SEC Charges Crowdfunding Portal, Issuer, and Related Individuals for Fraudulent Offerings
Litigation Release No. 25210 / September 20, 2021
Securities and Exchange Commission v. Robert Samuel Shumake, Jr., Willard L. Jackson, Nicole T. Birch, 420 Real Estate, LLC, Vicent Petrescu aka Vincent Petrescu, and TruCrowd, Inc. dba Fundanna, No. 21-cv-12193 (E.D. Mich. filed September 20, 2021)
The Securities and Exchange Commission today charged three individuals and one issuer with conducting a fraudulent scheme to sell nearly $2 million of unregistered securities through two crowdfunding offerings. The SEC also charged the registered funding portal and its CEO, who placed the offerings on the portal's platform.
According to the SEC's complaint, Robert Shumake, alongside associates Nicole Birch and Willard Jackson, conducted fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies, Transatlantic Real Estate, LLC and 420 Real Estate, LLC. Shumake, with assistance from Birch and Jackson, allegedly hid his involvement in the offerings from the public out of concern that his prior criminal conviction could deter prospective investors. The complaint alleges that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, and Shumake and Jackson raised $888,180 through 420 Real Estate. Shumake, Birch, and Jackson allegedly diverted investor funds for personal use rather than using the funds for the purposes disclosed to investors. As alleged, TruCrowd, Inc., a registered funding portal, and its CEO, Vincent Petrescu, hosted the Transatlantic Real Estate and 420 Real Estate offerings on TruCrowd's platform. Petrescu allegedly failed to address red flags including Shumake's criminal history and involvement in the crowdfunding offerings, and otherwise failed to reduce the risk of fraud to investors.
The SEC's complaint, which was filed in the U.S. District Court for the Eastern District of Michigan, charges Shumake, Birch, Jackson, and 420 Real Estate with violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars. The complaint also charges TruCrowd and Petrescu with violating Section 4A(a)(5) of the Securities Act of 1933 and Rule 301(c)(2) thereunder and seeks disgorgement plus pre-judgment interest, penalties, and permanent injunctions.
The SEC's Office of Investor Education and Advocacy has issued an investor bulletin on crowdfunding and investor alerts on the red flags of investment fraud. Additional information is available at Investor.gov.
The SEC's investigation was conducted by Jerrold H. Kohn, Dante A. Roldán, Pesach Glaser, and Kristine Rodriguez, and supervised by Ana D. Petrovic, and the litigation will be led by John Birkenheier, all of the Chicago Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.