John SchroyerMarch 3, 2023
The SEC thoroughly vets companies looking to fundraise under 'Regulation Crowdfunding.'
crowdfunding Archives - Green Market Report
John SchroyerMarch 3, 2023
Debra BorchardtFebruary 8, 2023
Not having to do a venture cap dance is enticing to those needing money.
StaffMay 17, 2022
Green Goddess Supply, a “cultivation to consumption” cannabis technology lifestyle brand offering a line of high-quality products to grow, store, prep and consume hemp flower and cannabis products has launched a crowdfunding campaign. The company was initially funded by management and “friends and family.” With this offering, the company will gain access to over 750,000 investors via the StartEngine Regulation CF platform, to showcase its patented cannabis home grow system.
“We are incredibly excited to launch this initiative,” said Founder and CEO, Eric Robichaud. He continued, “What’s impressive to me is management’s ability to build, ship and deliver almost 600 systems during the global pandemic that has been riddled with supply chain obstacles and seemingly never ending “red tape” including, but not limited to, price gouging for Ocean Freight, new hidden costs such as “port congestion,” scarce and expensive domestic LTL shipping, supply chain and materials delays, and more.” The company has overcome these obstacles and is expanding The Armoire product line with new, higher-margin models ready for the 2022 holiday selling season. This capital raise will enable the company to continue to expand the product line, and scale sales and marketing.
Green Goddess Supply has built a catalog of cannabis-centric accessory products including storage boxes, rolling trays, grinders, pipes and more. The crown jewel in its product line is the critically acclaimed, award-winning personal home grow system sold and marketed as “The Armoire.” Now, with a U.S. patent in hand and rave reviews, the company believes The Armoire is ready for prime time.
Robichaud points out that The Armoire isn’t “just some idea” – it’s gone through R&D, prototyping, pre-production and into production. The company has built-out shipping and warehousing capabilities, internal and external systems and processes, and more. “It’s amazing to see the results of these Armoire units successfully deployed in homes across the country, which have been able to really help to change and improve lives! We’re now ready to scale up and bring it to the masses,” he said.
“We are part of a larger, DISRUPTIVE revolution: investing in private companies in red-hot sectors before they go public or are sold,” said Vincent Bitetti, inventor of The Armoire and Chief Cannabis Officer at Green Goddess Supply. “Under Reg CF, companies apply via a highly-regulated system, akin to going public. It all takes place through an SEC-registered intermediary, either a broker-dealer or a funding portal such as StartEngine.com.” These rules are relatively new—the SEC approved Reg CF in 2017. For the first time ever, this enables eligible companies to offer and sell securities through crowdfunding. And similarly, it allows individual investors to access pre-IPO businesses that were previously only accessible to accredited investors – typically via private placements as companies prepare to go public.
Debra BorchardtDecember 20, 2021
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 BorchardtFebruary 4, 2020
Editors note: This is not an endorsement of this offering.
North Carolina-based Franny’s Farmacy announced on Friday, January 31st, the launch of its third online public offering. The company said the goal of this online public offering is to support the expansion of Franny’s Manufacturing, where all of its Franny’s branded edibles, topicals, lotions, treats, and more are made for the men, women, children, and pets they call loyal customers.
So far the company has raised $47, 586 from 85 investors. The company’s valuation is listed as $3 million. Shares are priced at $2.
The shares have no voting rights and if for any reason the company ceases operation, investors will only receive money after all creditors have been paid. The shares are also restricted and cannot be sold for at least 12 months. CEO Jeff Tacy, and Franny Tacy, are the owners of Franny’s Farmacy. Franny is the first female hemp farmer in North Carolina. They each own 50% of the voting shares.
“Franny’s Manufacturing is where the magic happens! All Franny’s branded products are manufactured in small, custom-made batches in Asheville, North Carolina. We create the recipes and techniques that our customers know and love right here!” says Franny Tacy.
The offering is planned for purchasing more equipment and expanding operations. With six dispensaries already open, Franny’s Farmacy is on track to open 20-25 franchise dispensaries by the end of 2020. The company’s current monthly expense is $30,000 and has revenue of $40,000 for the same month, which was October 2019. The company says it does not need the money to operate but needs it for expansion.
“Franny’s Manufacturing is a critical component in our vertically integrated supply chain. To continue to build our manufacturing infrastructure, we’ve decided to turn to crowdfunding and give you, the investor, an opportunity to get in on the ground floor of a quickly emerging industry,” says Jeff Tacy.
“We currently have 7 Corporate entities owned that make up the business: Franny’s Farm, (3) Franny’s Farmacy Dispensaries, Franny’s Manufacturing, Franny’s Franchising and Franny’s Distribution. Each of the companies has separate bank accounts and accounting methods. Franny’s Brand does not currently have a parent company and all companies are of equal legal status in the eyes of the State of North Carolina.”
The founders have raised $535 thousand dollars with two prior fully oversubscribed Reg CF raises.
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