SEC Accepts Settlement On Cannabis Crowdfunding Scheme

The Securities and Exchange Commission (SEC) has reached a settlement with the regulator, according to a court filing Friday with TruCrowd Inc. as reported by Law360. TruCrowd, also known as Fundanna agreed to pay $243,747 in disgorgement, interest and penalties with regards to a claim that the company ignored red flags about businessman Robert Shumake Jr. In September, the SEC  filed charges against three individuals and one issuer on a crowdfunding scheme for two cannabis companies that raised $2 million. The money was supposed to be used to buy and invest in cannabis properties, but no money was ever used for those purposes. Instead, the money was siphoned off for personal use. In addition to that, the SEC also charged the registered crowdfunding portal, TruCrowd, and its CEO Vincent Petrescu, who placed the offerings on the portal’s platform. For his part, Petrescu will pay a $9,700 fine as part of the settlement. Law360 reported that neither he nor TruCrowd admits or denies the SEC’s allegations against them.

In addition to those settlements, Shumake’s associate Nicole Birch has also agreed to settle the claims against her by paying more than $679,000 in disgorgement and interest as well as a $200,000 fine. The report also stated that she also neither admits nor denies the claims.

Scam Cannabis Real Estate Companies

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. The complaint alleges that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, while 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.

Birch was the CEO of Transatlantic Real Estate and Bangi, Inc. The complaint alleges that Birch facilitated the payment of money from the Transatlantic Real Estate offering to herself and to H.B. Associates. Birch is also CEO of Bangi, which is a publicly-traded company that supposedly specializes in the acquisition and leasing of properties that support the cannabis industry. Bangi’s common stock trades in the over-the-counter market under the symbol “BNGI.”  Jackson was the CEO of 420 real Estate and is accused of Jackson taking the payment of money from the 420 Real Estate offering to the Jackson Entities. 420 Real Estate is a Houston TX LLC.

Shumake’s Criminal Past

Investors were unaware of Shumake’s criminal past when they invested in the real estate companies. According to the filing, in December 2017, Shumake pled guilty to two misdemeanor violations of the Michigan Credit Services Protection Act, and on behalf of his business, to two felony counts of obtaining money by false pretense, for improperly taking upfront fees for mortgage audit services that he promised, but failed to deliver (People v. Shumake, et al., Mich. 46th Jud. Dist. (Feb. 15, 2017)). The filing went on to say that the presiding court sentenced Shumake to a probationary period of 18 months, during which time Shumake was forbidden to work in a position where he could have “direct control over, or access to, another person’s money.” Before his probation ended in May 2019, he is said to have begun working with the Transatlantic Real Estate offering with Birch and set in motion the 420 Real Estate offering with Jackson.

The complaint suggested that Shunake’s personal relationship with Birch led them to create the crowdfunding scheme and hide Shumake’s involvement with the company. The complaint also says that “Shumake regularly attended and participated in Bangi Board meetings, gave direction to the company’s officers and directors, and conducted business on behalf of Bangi. Board minutes identify Shumake as the founder of Bangi. Bangi Directors and Shumake discussed his criminal history and its potential impact on prospective investors. Despite his involvement in the affairs of Bangi, Shumake elected not to serve as an officer or director of the company. Nor was he listed on Bangi’s website.”

Through the Bangi company, Shumake connected with Jackson to create 420 Real Estate and also hide his involvement with that company. The fear was that if investors became aware of Shunake’s criminal past they wouldn’t want to commit any money.

Lies To Investors

The SEC alleges that The Transatlantic Real Estate offering statement lied to potential investors. They claim that Transatlantic Real Estate told investors it had employed a senior management team that had significant experience in the real estate industry and sophisticated finance and capital markets expertise, which wasn’t the case. Investors were also told that Transatlantic Real Estate had acquired a 9-plus acre property with 80,000 Square Foot Green Houses located in California; and that Transatlantic Real Estate would use $584,220 of the proceeds for “property improvement.” None of which was true. 420 Real Estate is also being accused of making similar false claims to investors.

Shumake’s connection to the company was kept secret even though he directed communications with current and prospective investors, lined up a transfer agent for Transatlantic Real Estate, helped prepare documents and promote the offering, solicited Transatlantic Real Estate advertisements from third parties, and drafted advertising scripts for social media.  Shumake is also accused of performing similar duties for 420 Real Estate without that being disclosed to investors.

TruCrowd is Not So Truthful

The crowdfunding site called TruCrowd is a registered funding portal. The SEC alleges that CEO Vincent Petrescu hosted the Transatlantic Real Estate and 420 Real Estate offerings on its platform but is accused of failing 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. Some 2,000 investors from various states gave money to the companies without knowing that they were being given false information about the companies.

Petrescu is responsible for selecting the companies for his site. He also assisted in preparing the documents for the offerings. In exchange for its services in connection with the Transatlantic Real Estate and 420 Real Estate crowdfunding offerings, TruCrowd received $91,679 and $48,412, respectively. Petrescu was aware of Shumake’s deep involvement with the companies and continued to keep investors in the dark about his connections. Petrescu continued to work with Shumake despite learning of his past through a securities lawyer who declined to work with Shumake for a Reg-A offering proposed for Bangi.

Apparently, it didn’t take investors long to suspect they were being scammed and began sending complaints to Petrescu, who either ignored them or assured the investors that everything was okay. No registration statements were filed with the SEC.

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 the antifraud and registration provisions of the Securities Act of 1933 and Securities Exchange Act of 1934, and seeks disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars. The complaint also charges TruCrowd and Petrescu with violating the crowdfunding rules of the Securities Act and seeks disgorgement plus pre-judgment interest, penalties, and permanent injunctions.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


30 comments

  • Christian Garcia

    October 18, 2021 at 10:41 pm

    If there is a class action lawsuit, I would like to participate. Need to recouped my investment money.

    Reply

    • Edward B Gresham

      October 25, 2021 at 10:13 am

      Me too!

      Reply

    • Samantha

      January 26, 2022 at 11:53 am

      Just hearing about this. Me as well!

      Reply

    • Queen

      April 6, 2022 at 12:55 pm

      Let’s all of us get together
      An
      file
      a
      Huge Class Action Suit
      Against
      them
      All

      Reply

    • Stan

      June 7, 2022 at 6:23 pm

      Same here. Any new updates on this? Thank you

      Reply

    • Denise Sparks

      July 23, 2022 at 12:09 pm

      Ii was scammed as well

      Reply

    • Andrea Gomes

      August 4, 2022 at 5:19 pm

      I’m trying to do that email me

      Reply

    • Andrea

      August 24, 2022 at 6:56 pm

      Hello We are trying to put together a class action lawsuit.

      Reply

  • Nia Foxx

    December 8, 2021 at 10:26 am

    I was one of the duped as well, lickily I only made a small investment to see how things would go but I still want my money back.

    Reply

    • Queen

      April 6, 2022 at 12:48 pm

      I think we should take from them what they took from us let’s get
      this
      Class action suit
      started multiple heads Is better than one

      Reply

  • LTBRUCE

    March 12, 2022 at 12:49 am

    How are investors being informed of procedures to recoup investments or any class action suits?

    Reply

    • Queen

      June 20, 2022 at 1:59 pm

      I would like to join forces
      with
      you and everyone on this page
      On
      filing
      A
      Class-action suit against these people
      Please email me and let me know If you’re Interested
      I think it’s better to have multiple people
      than just one
      Their not going to take a case with just one person
      We need the group of us
      Even starting out with a couple
      of
      Us
      but we can’t let this go
      I need that money with Intrest
      Here Is my email
      QueenAnitaEmpireInc@aol.com
      To start the Law Suit

      Reply

  • Tamanie Pitts

    March 18, 2022 at 1:28 pm

    I just found this out by trying to reach TransAtlantic Real Estate, LLC. and found this article about it being a scam. I would like to participate in a class action law suit to recoup my investment with interest.

    Reply

  • Queen

    April 6, 2022 at 12:43 pm

    I was scam by Investing In this company because
    I thought this was legit
    Because It was recommended
    by
    Roland Martin from Unfiltered
    that’s
    The only reason why
    I Invested
    cuz
    I am one of his followers on his YouTube shows
    I don’t believe
    Roland Martin
    knew It was a scam
    I think he might have been scam as well
    but
    I found out about this a couple of months ago
    when
    I was trying to find out about the update on
    my
    Investments
    I would like to know
    If
    there’s a
    Class Action Suit
    I want to be a part
    of
    It
    I want to sue the pants off these people
    I don’t want just want
    My Invested
    I want the Interest of the Investment that they promised me that
    It was supposed to mature after a certain amount of time and the
    Interest of the years that they lied to us
    and
    The Interest on the stress pain and suffering
    they
    Took mines
    So
    I wanna take
    theirs
    All you people on here
    who’s looking to start
    A Class-Action Suit
    let’s do It
    I’m down

    Reply

    • Stan

      June 7, 2022 at 6:24 pm

      Count me in.

      Reply

      • Andrea

        August 24, 2022 at 6:57 pm

        We are talking to a lawyer we need as many people an we can get

        Reply

        • Kyle

          September 30, 2022 at 1:14 am

          Count me in I want to join the lawsuit as well.

          Reply

  • Pam Muncie

    April 8, 2022 at 4:30 pm

    Count me in as well, for a class action lawsuit. This scam was NO accident, they took from the little people and did it intentionally. There is a certain place in hell for them. I hope because they “agreed” or admitted to the fraud, they won’t dodge the bullet and not serve any time. I invested $1,200 and I need that money SO bad now because of the pandemic. Keep my posted about what you hear.

    Reply

    • Queen

      April 20, 2022 at 9:39 pm

      Yes
      Please
      Anyone
      Everyone Count Me
      In
      If
      There’s A Class Action Suit
      Please
      Email
      me
      @
      QueenAnitaEmpireInc@aol.com
      Blessings to u all

      Reply

  • Pam Muncie

    April 8, 2022 at 4:39 pm

    These people knew exactly what they were doing and how it was going to hurt people. They didn’t care. They took our money and drove off into the sunset. They deserve to go to jail for a few years and lose everything they have. The whole thing is sickening and we have to keep remembering, while they were out, living the high-life, we were trying to keep our heads above water. I want the money that I invested, back to me, and see these people behind bars.

    Reply

  • Jonathan Jefferson

    April 9, 2022 at 9:08 am

    They got me as well. As a veteran, I thought this would be a good investment and a way of helping other combat veterans such as myself. I would like to be compensated for all of my losses.

    Reply

  • S. Rigby

    May 10, 2022 at 11:21 am

    Please let me know of any class action lawsuit as I was part of this scam!

    Reply

  • Stan

    June 7, 2022 at 6:26 pm

    Count me in.

    Reply

  • Lee Nora Glover Holloway

    June 8, 2022 at 1:32 pm

    I invested in 2019 I have copies of statements, letters and such from every source that was behind TRUcrowd and 420 Real Estate LLC.
    Does anyone know of any attorneys and how can we get SEC to protect us and get our money back? SEC is a government funded commission government ; funded meaning our tax money funds them so how can we get them to get our money back with interest?

    Reply

    • Debra Borchardt

      June 9, 2022 at 8:50 am

      The SEC is not an enforcement agency. Your best solution is to hire an attorney and sue the parties involved. The SEC mostly hands out fines or barrs people from serving in executive positions. If it’s really bad they may turn it over to the FBI, who is an enforcement agency. However, they have limited staff for these types of offences.

      Reply

    • Eva S

      June 18, 2022 at 5:15 pm

      I invested and bought two shares. please email me at esiakam@yahoo.com. I want to sue them. A class action law suit is in order

      Reply

    • Andrea

      August 24, 2022 at 6:59 pm

      Email me

      Reply

  • Andrea Gomes

    August 4, 2022 at 5:13 pm

    Hello my name is Andrea I contacted a law firm called Morgan and Morgan to see if they can help here is their number maybe if Everyone call we can make something happen.

    800-555-6666
    I am filling out paperwork today stating what happened.

    Reply

  • Queen W-Hardy

    August 31, 2022 at 10:00 am

    Yes Me & Ms Andrea Gomes
    JOIN US IN THIS CLASS ACTION SUIT

    Have spoke to a law firm and they said that we need more people to join in on the class action in order for them to take the case please feel free to get in contact with us here is my email address if you want to join the lawsuit with me and Ms Andrea
    QueenAnitaEmpireInc@aol.com

    Reply

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