Crowdfunding Portal owner and Others Charged With Fraudulent Offerings by SEC

CALIFORNIA.–(GOWERCROWD)

On September 20th, the SEC charged three individuals in relation to the fraudulent sale of close to $2 million in unregistered securities via crowdfunding offerings. In addition, the SEC charged the registered funding portal itself alongside its CEO for placing the offerings on their portal platform. 

According to a complaint filed by the SEC, Robert Shumake, Nicole Birch, and Willard Jackson engaged in a scheme to solicit investor funds for two cannabis companies, Transatlantic Real Estate, LLC and 420 Real Estate, LLC, via unregistered, fraudulent crowdfunding offerings. Jackson and Birch served as the face of the operation, with Shumake working behind the scenes, reportedly due to his belief that his criminal history would scare off potential investors. 

In total, Shumake and Birch raised $1,020,100 from individual investors through Transatlantic Real Estate, while Jackson and Shumake raised an additional $888,180 through 420 Real Estate. Rather than using funds for business operations, acquisitions, or project purposes, the trio allegedly siphoned funds for their own personal use. 

Both offerings, Transatlantic Real Estate and 420 Real Estate, were hosted by TruCrowd, Inc., a registered funding portal. Their CEO, Vincent Petrescu, is charged with failing to properly vet the listings, either failing to notice or ignoring Shumake’s criminal history and also failing to consider his considerable involvement in the offerings. The SEC also alleges that Petrescu’s oversights led to investors being unaware of the considerable risk involved with the crowdfunding listings.

The complaint was filed by the SEC in the U.S. District Court for the Eastern District of Michigan on September 20, 2021, and charges Birch, Jackson, and Shumake 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. Additionally, the SEC is seeking disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars. TruCrowd and Petrescu are alleged with having violating Section 4A(a)(5) of the Securities Act of 1933 and Rule 301(c)(2) thereunder and the SEC is seeking disgorgement plus pre-judgment interest, penalties, and permanent injunctions.

These SEC charges are just the latest of several recent high-profile crowdfunding-related fraud and rule violation cases, including the spectacular collapse of NY-based Prodigy Network, the guilty mail fraud plea by the founder of Jacksonville-based Realty E Vest, as well as the recently obtained $15 million final judgment against a Virginia real estate developer by the SEC. These cases will continue to pop up in the real estate crowdfunding space, particularly as interest (and capital!) flows toward the sector at a fast clip.