In Brief:
- The SEC filed a complaint against three individuals and issuer over a $2M fraudulent scheme.
- This case is SEC’s first involvement in regulating crowdfunding.
- TruCrowd, registered funding portal, is also charged for not addressing red flags.
The US Securities and Exchange Commission (SEC) charged three people and one issuer involved in the crowdfunding scheme. These perpetrators are involved in a fraudulent scheme to sell $2million unregistered securities through two different crowdfunding.
The SEC had also charged the registered funding portal and its CEO as they placed this fraud scheme on the portal’s platform. This is the SEC’s first involvement in regulating crowdfunding. Shumake allegedly hid his involvement in the offerings out of concern that his prior criminal conviction could deter prospective investors.
As per the SEC complaint, Robert Shumake, Nicole Birch, and Willard Jackson conducted crowdfunding offerings through two cannabis and hemp companies. Nearly $2 million was raised on the registered funding portal named TruCrowd Inc through Transatlantic Real Estate LLC and 420 Real Estate LLC.
Shumake, Birch, and Jackson allegedly diverted investor funds for personal use rather than using the funds for the purposes disclosed to investors. SEC charged TruCrowd and its CEO Petrescu as he “failed to address red flags” and continued to host the ventures on his platform.
The SEC had filed this complaint in the US district court of Eastern District of Michigan. The court charges Shumake, Birch, Jackson, and 420 Real Estate with anti-fraud and registration violations. The SEC is seeking disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars.
The SEC has charged TruCrowd and its CEO for violating the crowdfunding rules.
“Crowdfunding offerings enable issuers to cast a wide net for potential investors, emphasizing the importance of full and honest disclosure,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “As companies continue to raise funds through crowdfunding offerings, we will hold issuers, gatekeepers, and individuals accountable and enforce the protections in place for all investors.”
The SEC is investigating cryptocurrencies and related areas in every possible way to stop fraudulent activities. Just two weeks ago, the SEC charged Satish Kumbhani, founder of BitConnect, and US based promoter Glenn Arcaro over raising $2bn in crypto fraudulently.
