SEC files enforcement action against alleged crowdfunding scheme

The Securities and Exchange Commission (SEC) has charged those involved with a crowdfunding scheme for allegedly selling $2 million in unregistered securities.

In an announcement today, the agency claims Robert Shumake, Nicole Birch and Willard Jackson conducted fraudulent crowdfunding offerings through cannabis and hemp companies Transatlantic Real Estate LLC and 420 Real Estate LLC. The SEC also says Shumake hid his involvement, since he worried his prior criminal convictions could sway investors away from the project. 

Through the two companies, the SEC claims the group raised $2 million over the crowdfunding platform TruCrowd. The SEC has charged the platform and its CEO, Vincent Petrescu, as well since he "failed to address red flags" and continued to host the ventures on his platform. Petrescu and TruCrowd are facing charges of violating the crowdfunding rules of the Securities Act.

The SEC amended its regulation crowdfunding rules in late 2020, increasing the regulation crowdfunding offering limit from $1 million to $5 million. Still, firms must register with the agency to comply with crowdfunding rules. The agency has yet to take action against crowdfunding offerings. This case against TruCrowd, Transatlantic Real Estate LLC and 420 Real Estate LLC represents early enforcement steps related to the rules.

Shumake, Birch and Jackson area facing charges related to antifraud and registration violations. The SEC is seeking disgorgement, penalties and permanent injunctions in its case, which was filed in the U.S. District Court for the Eastern District of Michigan.