Shumake Crowdfunding Complaint From SEC

Case 2:21-cv-12193-MFL-APP ECF No. 1, PageID.
1 Filed 09/20/21 Page 1 of 40
UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
UNITED STATES SECURITIES

AND EXCHANGE COMMISSION,
Case No. 21-cv-12193
Plaintiff, Hon.
v.
JURY TRIAL DEMANDED
ROBERT SAMUEL SHUMAKE, JR.,
WILLARD L. JACKSON,
NICOLE T. BIRCH,
420 REAL ESTATE, LLC,
VICENT PETRESCU
aka VINCENT PETRESCU, and
TRUCROWD, INC. dba FUNDANNA,
Defendants.
_____________________________________/
COMPLAINT
Plaintiff, the United States Securities and Exchange Commission (“SEC”),
alleges as follows:
SUMMARY OF ACTION
1. The SEC brings this action to remedy two fraudulent crowdfunding
offerings conducted by Defendants Robert Samuel Shumake. Jr. (“Shumake”),
Willard L. Jackson (“Jackson”), and Nicole T. Birch (“Birch).
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Case 2:21-cv-12193-MFL-APP ECF No. 1, PageID.2 Filed 09/20/21 Page 2 of 40
2. The issuers of the securities that were fraudulently sold to members of
the public were Defendant 420 Real Estate, LLC (“420 Real Estate”) and a now
defunct company named Transatlantic Real Estate, LLC (“Transatlantic Real
Estate”).
3. Transatlantic Real Estate and 420 Real Estate raised funds through
offerings on a crowdfunding platform hosted by Defendant TruCrowd, Inc.
(“TruCrowd”). TruCrowd’s CEO, Defendant Vicent Petrescu, aka Vincent
Petrescu (“Petrescu”), was responsible for selecting which issuers could use
TruCrowd’s platform to conduct crowdfunding offerings. Under the SEC’s
crowdfunding regulations, Petrescu and TruCrowd served as gatekeepers and, as
such, were responsible for taking measures to reduce the risk of fraud.
4. Shumake and Birch offered and sold securities of Transatlantic Real
Estate from September 2018 through May 2019. Shumake and Jackson offered
and sold securities of 420 Real Estate from May 2019 through June 2020.
5. Shumake was the driving force behind the both offerings, but he kept
his participation secret in order to hide a past criminal conviction arising from a
mortgage fraud scheme. Shumake convinced Birch to act as the chief executive
officer and sole member of Transatlantic Real Estate and convinced Jackson to act
in the same roles for 420 Real Estate.
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6. Shumake, along with Birch and Jackson, marketed both offerings as
opportunities for investors to share in bountiful profits from the cannabis industry,
by acquiring real estate and leasing it to companies engaged in the business of
growing cannabis.
7. Shumake, Birch, and Jackson made multiple false and misleading
representations and omissions to investors in connection with the crowdfunding
offerings. Among other things, they concealed Shumake’s past criminal history
and his leading role in both offerings. And to make matters worse, they diverted
hundreds of thousands of dollars from the offering proceeds for their personal
benefit. None of the money raised in either offering was used to acquire or
improve cannabis real estate. None of the investors in either crowdfunding
offering has received any return on their investment, and few investors have
recovered any of the funds they invested.
JURISDICTION AND VENUE
8. The Court has jurisdiction over this action pursuant to Sections 20(b)
and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and
77v(a)], and Sections 21(d) and 27(a) of the Securities Exchange Act of 1934
(“Exchange Act”) [15 U.S.C. §§78u(d) and 78aa(a)].
9. Venue is proper in this judicial district pursuant to Section 22(a) of the
Securities Act [15 U.S.C. § 77v(a)] and Section 27(a) of the Exchange Act [15
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U.S.C. § 78aa(a)], because many of the acts, transactions and courses of business
constituting the violations alleged in this Complaint occurred within the
jurisdiction of this district.
10. In connection with the conduct alleged in this Complaint, the
Defendants, directly and indirectly, have made use of the mails and/or means or
instrumentalities of transportation or communication in interstate commerce.
DEFENDANTS
11. Robert S. Shumake, age 53, resides in Bloomfield Hills. 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 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.” Shumake ignored the terms of his
probation sentence. Before his probation ended in May 2019, he conducted the
Transatlantic Real Estate offering with Birch and set in motion the 420 Real Estate
offering with Jackson. Shumake owns and controls Shumoja Media Group, LLC
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(“Shumoja”), a purported marketing services company, which received money in
connection with the crowdfunding offerings.
12. Willard L. Jackson, age 57, resides in Houston, Texas. Jackson
serves as the CEO and the sole director of 420 Real Estate. Jackson previously
served as a director of Bangi, Inc., described below. Jackson also held ownership
interests in WLJ Group, LLC and Ebony Media Holdings, LLC, (collectively, the
“Jackson Entities”). Jackson facilitated the payment of money from the 420 Real
Estate offering to the Jackson Entities.
13. Nicole T. Birch, age 46, resides in Gainesville, Georgia. Birch is a
licensed attorney in Georgia and has her own law practice, H.B. Associates P.C.
(“H.B. Associates”). Birch has served as CEO and sole director of both
Transatlantic Real Estate and Bangi, Inc. Birch facilitated the payment of money
from the Transatlantic Real Estate offering to herself and to H.B. Associates.
14. 420 Real Estate, LLC is a Texas limited liability company formed in
April 2019 with its principal place of business in Houston, Texas. 420 Real Estate
purports to be a real estate company that specializes in the acquisition and leasing
of properties that support the hemp industry. 420 Real Estate is owned by Willard
Jackson. 420 Real Estate raised $888,180 through a crowdfunding offering
between May 2019 and June 2020 (“420 Real Estate offering”).
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15. TruCrowd, Inc. dba Fundanna is a Delaware corporation with its
principal place of business in Chicago, Illinois. TruCrowd is an SEC-registered
funding portal for crowdfunding offerings. TruCrowd hosted the crowdfunding
offerings for Transatlantic Real Estate and 420 Real Estate through its platform.
16. Vicent Petrescu, aka Vincent Petrescu, age 49, resides in
Algonquin, Illinois. Petrescu, a licensed CPA, is the founder and CEO of
TruCrowd. Petrescu granted Transatlantic Real Estate and 420 Real Estate access
to TruCrowd’s platform to conduct the crowdfunding offerings.
RELATED ENTITIES
17. Transatlantic Real Estate, LLC was a California limited liability
company formed in August 2018 with its principal place of business in Grosse
Pointe Farms. Transatlantic Real Estate purported to be a real estate company that
specialized in the acquisition and leasing of properties that support the medical
cannabis industry. Transatlantic Real Estate raised $1,020,100 through a
crowdfunding offering between September 2018 and May 2019 (“Transatlantic
Real Estate offering”). According to the offering statement for the Transatlantic
Real Estate offering, Birch was the one hundred percent owner, CEO, chairman,
and sole director of the company. On July 9, 2021, Transatlantic Real Estate filed
a Certificate of Cancellation with the California Secretary of State, which
terminated its status as a limited liability company.
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18. Bangi, Inc. (“Bangi”) is a Nevada corporation with its principal place
of business in Grosse Pointe Farms. Bangi is a publicly traded company that
purports to specialize 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.” According to Bangi’s most recent SEC filing, Birch is
the CEO of Bangi.
FACTS
Shumake Explores Various Means to Raise Money through Securities
Offerings
19. Following his guilty plea, but before the end of his probationary
period and the court order prohibiting him from having access to other people’s
money, Shumake began taking steps to raise money from the public to enter the
cannabis industries. Ultimately, he pursued crowdfunding offerings as a means to
raise funds.
20. Crowdfunding offerings are governed by the securities transaction
registration provisions of the Securities Act [17 U.S.C. §§ 77(a), et seq.] and
Regulation Crowdfunding thereunder [17 C.F.R. § 227.100, et seq.]. From 2018
through 2020—the years relevant to this Complaint—these crowdfunding
provisions allowed an unregistered offering of up to $1,070,000 through an
intermediary, in this case, a funding portal registered under Rule 400 of Regulation
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Crowdfunding. Issuers could offer and sell their securities through the
intermediary’s platform on the internet. Prior to the start of the crowdfunding
offering, the issuer was required to file with the SEC a “Form C,” and disclose
certain information about the issuer and the offering through the Form C and
offering statement. For instance, issuers relying on the crowdfunding registration
exemption were required to disclose, among other information, the names of all the
issuer’s officers, directors, and persons occupying a similar status or performing a
similar function; the purpose and intended use of the offering proceeds; related-
party transactions with the issuer’s officers and promoters that are, in the
aggregate, in excess of five percent of the aggregate capital that the issuer seeks to
raise; and any material information necessary in order to make the statements made
not misleading, in light of the circumstances under which they were made.
Regulation Crowdfunding also requires that the funding portal post the offering
statement for each issuer on its internet platform so that all prospective investors
have access to the same information relating to the issuer’s offering.
21. In September 2018, Shumake enlisted Birch, an attorney with whom
he was in a personal relationship, to form Transatlantic Real Estate, with Birch
holding the positions of CEO and sole member. Shumake also convinced Birch to
raise funds through a crowdfunding offering and to hide Shumake’s involvement.
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22. Transatlantic Real Estate’s mailing address was a UPS store in Grosse
Pointe Farms, near where Shumake lived, rather than in Georgia where Birch lived.
23. Shumake set up Bangi in November 2018, while he was working with
Birch to conduct the Transatlantic Real Estate crowdfunding offering. Bangi’s
address at the time was the same UPS store in Grosse Pointe Farms that
Transatlantic Real Estate used.
24. According to its website, Bangi “acquires specialized assets including
hemp and cannabis farms, dispensaries, commercial real estate, industrial real
estate, and leases real estate to the multi-billion dollar and growing cannabis
industry.”
25. 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.
26. Shumake explored the possibility of Bangi conducting an offering
under SEC Regulation A+ [17 C.F.R. § 230.251, et seq.], which permitted higher
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fundraising amounts than those allowed under Regulation Crowdfunding.
Ultimately, an offering for Bangi never occurred.
27. In April 2019, Shumake enlisted Jackson, a friend and Bangi director,
to form 420 Real Estate, with Jackson as the CEO and sole member. Shumake
convinced Jackson to utilize 420 Real Estate as a vehicle for raising funds through
a crowdfunding offering (the “420 Real Estate offering”). Shumake also
convinced Jackson to hide Shumake’s involvement in the 420 Real Estate offering.
28. Shumake discussed with Jackson his plans to use money raised
through the 420 Real Estate offering to fund Bangi.
29. Shumake’s name was not on any of the offering documents for
Transatlantic Real Estate or 420 Real Estate. Shumake, Jackson, and Birch all
knew that the disclosure of Shumake’s criminal past could hinder fundraising.
Therefore, they concealed Shumake’s involvement, and Birch and Jackson falsely
held themselves out as the sole persons with authority over the offerings.
The Transatlantic Real Estate Offering and Misuse of Investor Proceeds
30. Shumake arranged for TruCrowd to serve as the crowdfunding portal
for the Transatlantic Real Estate offering.
31. Birch, with Petrescu’s assistance, wrote the Transatlantic Real Estate
Form C and offering statement. Birch and Petrescu kept Shumake informed about
the drafting process by copying him on substantive email discussions about the
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offering statement. Birch, Shumake, and Petrescu also each weighed in on the
steps necessary to kick off and promote the Transatlantic Real Estate offering to
investors.
32. Transatlantic Real Estate filed the Form C and offering statement with
the SEC on September 12, 2018. Birch signed the Form C as the company’s sole
officer.
33. The Form C and offering statement omitted any mention of
Shumake’s involvement in the company or the offering. Rather, to conceal
Shumake’s criminal record, his name did not appear on any of the documents
associated with the Transatlantic Real Estate offering. Birch falsely held herself
out as the sole person with authority over the company and the offering.
34. Shumake and Birch knew that disclosure of Shumake’s criminal past
could hinder fundraising.
35. According to the Transatlantic Real Estate offering statement, the
company was a diversified investment vehicle that acquired and leased specialized
real estate assets. Its strategy was to acquire industrial real estate that could be
used as medical cannabis cultivation facilities.
36. The Transatlantic Real Estate offering statement represented that the
company was offering a maximum of 10,700 convertible notes for $100 each, and
that each subscription consisted of a “15% convertible Note . . . that mature[d]
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eighteen months from the date of issuance, and, at [the] company’s option, [was]
convertible at a 10% discount into the public market.”
37. The Transatlantic Real Estate offering statement represented that,
after expenses, the company intended to use the offering proceeds as follows: (1)
$194,740 for marketing; (2) $97,370 for legal fees; (3) $584,220 for property
improvement; and (4) $97,370 in administrative fees.
38. The Transatlantic Real Estate offering statement contained several
materially false and misleading statements, including the following:
a. Transatlantic Real Estate employed a senior management team that
had significant experience in the real estate industry and
sophisticated finance and capital markets expertise;
b. Transatlantic Real Estate had contingently acquired a 9-plus acre
property with 80,000 Square Foot Green Houses located in
California; and
c. Transatlantic Real Estate would use $584,220 of the proceeds for
“property improvement.”
d. Transatlantic Real Estate was not a party to any proposed
transaction with an officer, director or promoter of which such
party would receive in excess of 5% of the aggregate amount of
capital Transatlantic Real Estate intended to raise in the offering.
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e. Transatlantic Real Estate only had one individual who was the
company’s officer, director, or “person occupying similar status or
performing a similar function.”
39. All of these statements were false and misleading.
40. Transatlantic Real Estate never acquired any real estate and did not
use any of the offering proceeds to purchase or improve any property.
41. As for the management of Transatlantic Real Estate, Birch had no
experience in the real estate industry or sophisticated finance and capital markets
expertise and did not employ any individuals, let alone a “team” with such
experience on behalf of Transatlantic Real Estate.
42. The offering statement failed to disclose either Shumake’s criminal
record or that he would be actively involved in raising funds from investors and
managing the company.
43. Shumake co-managed Transatlantic Real Estate with Birch and was
extensively involved in the company’s strategic decisions. For instance, Shumake:
a. directed communications with current and prospective investors;
b. lined up a transfer agent for Transatlantic Real Estate;
c. helped prepare documents and promote the offering;
d. solicited Transatlantic Real Estate advertisements from third
parties and drafted advertising scripts for social media; and
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e. gave directions to Birch as to the disbursement of investor money
from Transatlantic Real Estate’s bank account.
44. From September 2018 through May 2019, Transatlantic Real Estate
raised $1,020,100 from approximately 2,000 investors in multiple states through
TruCrowd’s platform. The convertible notes that Transatlantic Real Estate offered
and sold to the investing public through TruCrowd were securities.
45. Birch and Shumake diverted the investors’ money for purposes
unrelated to Transatlantic Real Estate, including hundreds of thousands of dollars
transferred to Birch and her entity, H.B. Associates, and to Shumake and his entity,
Shumoja.
46. Shumake and Birch diverted $358,311–or 35% of the total offering
proceeds—to Birch and her firm, H.B. Associates.
47. Shumake and Birch diverted $304,709—or 30% of the total offering
proceeds—to Shumake and his company, Shumoja.
48. The Transatlantic Real Estate offering statement disclosed the
possibility of related party transactions, but stated those transactions would be
“consistent with the duties of the management of the Company to its shareholders.”
49. Birch and Shumake did not use any investor funds to buy or improve
property.
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50. The Transatlantic Real Estate investors have not received any
monetary return on their investment.
The 420 Real Estate Offering and Misuse of Investor Proceeds
51. Shumake arranged for TruCrowd to serve as the crowdfunding portal
for the 420 Real Estate offering and put Jackson in touch with Petrescu.
52. Jackson knew little about crowdfunding and relied on Shumake to
take the necessary steps for 420 Real Estate to conduct its crowdfunding offering.
Shumake told Jackson, a Bangi Director, about his plan to use the proceeds raised
from the 420 Real Estate offering to fund Bangi.
53. While Shumake was deeply involved in arranging the offering, he
persuaded Jackson to hide Shumake’s role with 420 Real Estate because of his
criminal history.
54. Petrescu and others participated in the drafting of the 420 Real Estate
Form C and offering statement. Petrescu and others kept Jackson and Shumake
informed about the drafting process by copying him on substantive email
discussions about the Form C and offering statement.
55. 420 Real Estate filed its Form C and offering statement with the SEC
on May 7, 2019. Jackson signed the Form C as the company’s sole officer.
56. The 420 Real Estate Form C and offering statement omitted any
mention of Shumake’s involvement in the company of the offering. Rather, to
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conceal Shumake’s criminal record, his name did not appear on any of the
documents associated with the 420 Real Estate offering. Jackson falsely held
himself out as the sole person with authority over the company and the offering.
57. Shumake and Jackson knew that disclosure of Shumake’s criminal
past could hinder fundraising.
58. According to its offering statement, 420 Real Estate is a diversified
investment vehicle that acquires and leases specialized real estate assets. Its
strategy is to acquire industrial real estate that can be used as hemp cultivation
facilities.
59. The 420 Real Estate offering statement represented that the company
was offering a maximum of 10,700 convertible notes for $100 each, and that “each
subscription consists of a 15% Convertible Note that mature[d] eighteen months
from the date of issuance, and at the company’s option, [was] convertible at a 10%
discount into the public market.”
60. The 420 Real Estate offering statement represented that, after
expenses, 420 Real Estate intended to use investor proceeds as follows: (1)
$537,450 for marketing; (2) $97,370 for legal fees; (3) $278,960 for property; and
(4) $97,370 in administrative fees.
61. The 420 Real Estate offering statement did not mention Bangi or any
intent to use the offering proceeds for Bangi.
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62. Nearly identical to the Transatlantic Real Estate offering statement,
the 420 Real Estate offering statement contained several materially false and
misleading statements, including the following:
a. 420 Real Estate’s employed a senior management team that has
significant experience in all aspects of the real estate industry,
including acquisitions, dispositions, leasing, development,
management, and finance;
b. 420 Real Estate would use $278,960 of the proceeds for “property
improvement;”
c. 420 Real Estate was not a party to any proposed transaction with
an officer, director or promoter of which such party would receive
in excess of 5% of the aggregate amount of capital 420 Real Estate
intended to raise in the offering; and
d. 420 Real Estate only had one individual who was the company’s
officer, director, or “person occupying similar status or performing
a similar function.”
63. All of these statements were false and misleading.
64. 420 Real Estate never used any offering proceeds for “property
improvement.”
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65. 420 Real Estate did not have a senior management team—only
Jackson and Shumake. Jackson had no experience in the real estate industry.
Shumake and Jackson concealed Shumake’s criminal record and the fact that
Shumake would be actively involved in raising funds from investors and managing
the company.
66. Money received from investors was deposited into an account
managed by TruCrowd’s escrow agent. Rather than transferring the offering
proceeds from the escrow agent directly to 420 Real Estate, Shumake arranged for
the funds to be transferred to an account managed by an attorney he knew. The
attorney was responsible for disbursing the funds and took directions individually
from Shumake and Jackson.
67. Shumake co-managed 420 Real Estate with Jackson and was
extensively involved in the company’s strategic decisions. For instance, Shumake:
a. directed communications with current and prospective investors;
b. helped prepare documents and promote the offering;
c. solicited advertisements from third parties and drafted advertising
scripts for social media; and
d. gave directions to the attorney as to the disbursement of investor
moneys.
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68. From May 2019 through June 2020, 420 Real Estate raised
approximately $888,180 from the sale of convertible notes to approximately 2,000
investors in multiple states through the TruCrowd platform. The convertible notes
that 420 Real Estate offered and sold to the investing public through TruCrowd
were securities.
69. Pursuant to an agreement, Jackson and Shumake had to give their
joint approval for all distributions of funds from the attorney. In fact, however,
Shumake and Jackson each individually directed the attorney to distribute the
funds without the approval of the other.
70. Jackson and Shumake diverted the investors’ money for purposes
unrelated to 420 Real Estate, including hundreds of thousands of dollars
transferred to Shumake, Shumoja, Jackson, and the Jackson Entities.
71. Shumake and Jackson diverted $280,608—or 32% of the total
offering proceeds—to Jackson and the Jackson Entities.
72. Shumake and Jackson diverted $114,029—or 13% of the total
offering proceeds—to Shumake, Shumoja, and Bangi.
73. Jackson and Shumake did not use any investor funds to buy or
improve property.
74. The 420 Real Estate investors have not received any monetary return
on their investment.
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Petrescu and TruCrowd Allowed the Offerings to Proceed Despite Warning
Signs of Fraud
75. Petrescu owned and, as TruCrowd’s owner and CEO, controlled the
activities of TruCrowd.
76. Petrescu, acting on behalf of TruCrowd, was responsible for selecting
which issuers and individuals could use TruCrowd’s platform to conduct
crowdfunding offerings.
77. Petrescu, acting on behalf of TruCrowd, engaged third party escrow
agents to hold investor funds.
78. 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.
79. Petrescu, acting on behalf of TruCrowd, assisted issuers and their
affiliated individuals with preparing and filing Forms C and offering statements.
80. Petrescu, acting on behalf of TruCrowd, permitted the Transatlantic
Real Estate and 420 Real Estate offerings to proceed despite multiple warning
signs of possible fraud or other harm to investors.
81. Petrescu, acting on behalf of TruCrowd, worked with both Shumake
and Birch to file the Transatlantic Real Estate Form C and offering statement.
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82. According to Petrescu, Birch told him that she was the sole officer of
Transatlantic Real Estate and that Shumake only provided marketing services.
However, Shumake routinely coordinated with Petrescu to address non-marketing
matters for the company, such as investor communications and lining up a transfer
agent.
83. Petrescu did not question why the Transatlantic Real Estate offering
statement omitted any mention of Shumake’s involvement with the company and
the offering.
84. In November 2018, two months after the Transatlantic Real Estate
offering opened, Birch forwarded an email to Petrescu from an individual who had
provided marketing services to Birch and Shumake in connection with the
Transatlantic Real Estate offering.
85. This individual’s email to Birch and Shumake complained that they
owed him money for services he had performed on the offering, stated that he had
referred Transatlantic Real Estate for collections, and warned them of the potential
impact of “SEC, Bad Actor Check.”
86. These emails required action by Petrescu, and through him, by
TruCrowd. Regulation Crowdfunding [17 C.F.R. §§227.301(c)] requires funding
portals and their associated persons to conduct a background and securities
enforcement regulatory history check (commonly referred to as a “bad actor”
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check) on each issuer and the issuer’s officers and directors (and any persons
performing a similar function) to determine if they are subject to disqualification
from participating in crowdfunding under Rule 503 of Regulation Crowdfunding,
and to remove an offering from their platform if they become aware of information
after they have granted access that causes them to reasonably believe that the issuer
or the offering presents the potential for fraud or otherwise raises concerns about
investor protection.
87. Even after receiving this email, Petrescu never requested a bad actor
check or ran a background check on Shumake. If Petrescu had done so, he would
have learned of Shumake’s criminal history.
88. A short time later, in December 2018, while the Transatlantic Real
Estate offering was still raising funds from investors, Petrescu referred Birch and
Shumake to an experienced securities attorney, to explore the possibility of a
Regulation A offering for Bangi.
89. The securities attorney emailed Petrescu on December 14, 2018, after
meeting with Shumake and Birch:
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90. The email linked to a 2017 news article, which discussed the criminal
charges filed by the Michigan Attorney General against Shumake and his business
Mortgage Auditors of America. A few hours later, Petrescu replied:
91. The 2017 news article read, in part, as follows:
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a. “[Michigan Attorney General] Schuette says Shumake was behind
a scheme to cheat people who were trying to save their homes from
Foreclosure.”
b. “The attorney general’s office investigated and recommended a
warrant for Shumake’s arrest in 2015, but Robert Shumake was in
Africa.”
c. “After filing for personal bankruptcy to the tune of more than $3
million, Shumake was busy posting on Facebook about his African
humanitarian work and even turned up on the Tanzanian TV news
as an American investor who ran a railroad.”
d. “[L]ast year he was caught in California with $121,000 cash in his
trunk and large sums of marijuana. He’s got an active arrest
warrant in that case.”
92. Despite admitting that he needed “to search some more,” Petrescu did
not follow up on this red flag. Instead, Petrescu allowed the Transatlantic Real
Estate offering to continue on TruCrowd’s platform.
93. Then, in or about April 2019, Petrescu agreed to work with Shumake
again and to host the 420 Real Estate offering on TruCrowd’s portal.
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94. Petrescu however, did not request a bad actor check on Shumake or
otherwise investigate Shumake’s past before agreeing to host the 420 Real Estate
offering.
95. The 420 Real Estate offering statement was nearly identical to the
Transatlantic Real Estate offering statement.
96. Nevertheless, Petrescu did not question the representations in those
documents that Jackson was the issuer’s sole officer or the omission of any
mention of Shumake’s involvement with the issuer or the offering.
97. During and after both the Transatlantic Real Estate offering and the
420 Real Estate offering, Petrescu, and through him TruCrowd, received a series of
investor complaints about both the Transatlantic Real Estate and the 420 Real
Estate offerings. Investors asked whether the offerings were scams. They
complained to Petrescu that the issuers were not responding to inquiries. Some
investors complained that they had not received certificates for their investments.
Others asked for the refund of their investments. All these emails should have
raised questions for Petrescu whether the offerings presented the risk of fraud or
investor harm, especially in light of the email exchanges described above.
98. Petrescu’s responses to the investor emails was to assure investors that
the offerings were not scams, and to represent that he had run bad actor checks.
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99. Petrescu forwarded some of the investor complaints to Shumake,
Jackson, and Birch.
100. On April 16, 2020, Jackson informed Petrescu that Shumake had
acted improperly. Jackson told Petrescu that it is “very disappointing to learn that
you took direction (without my knowledge) from Robert Shumake to redirect the
approval of funds process for 420 Real Estate crowdfund. He is not a party to my
agreement with you or [TruCrowd].” In a response on the same day copying
Petrescu, Shumake stated that the 420 Real Estate offering was designed to support
Bangi, Jackson’s business, Ebony, and the “263k used by me to seed the
operation.” Yet, this email did not prompt Petrescu to question why Bangi, Ebony,
and payments to Shumake were omitted from the 420 Real Estate Form C and
offering statement.
101. On April 16, 2020, when Petrescu received Jackson’s email, more
than $20,000 of investor funds was being held in escrow. Over the next several
weeks, approximately $20,000 in additional investor money was invested and
received into the escrow account.
102. On June 8, 2020, Birch told Petrescu that Shumake had allowed a
third party access to non-public information related to Transatlantic Real Estate
investors, and instructed Petrescu that, going forward, he should only take
- 26 -
direction from Birch. Petrescu responded that, until recently, he understood
Shumake to be a representative of Transatlantic Real Estate and Birch’s agent.
103. Despite these red flags, Petrescu permitted the 420 Real Estate
offering to proceed on the TruCrowd platform until it stopped accepting investors
in June 2020.
104. Petrescu continued to work with Shumake after June 2020. He
emailed Shumake about investor complaints. He also networked with Shumake in
an effort to arrange a crowdfunding offering by at least one other issuer.
COUNT I
Violations of Section 17(a) of the Securities Act
[15 U.S.C. § 77q(a)]
(Shumake, Jackson, Birch and 420 Real Estate)
105. Paragraphs 1 through 104 are realleged and incorporated by reference
as though fully set forth herein.
106. By engaging in the conduct described above, Defendants Shumake,
Jackson, Birch, and 420 Real Estate, in the offer and sale of securities, by the use
of the means and instruments of transportation or communication in interstate
commerce or by use of the mails, directly or indirectly, have employed devices,
schemes and artifices to defraud; obtained money and property by means of untrue
statements of material facts and omissions to state material facts necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading; and engaged in transactions, practices, and courses of

- 27 -
business which operated or would operate as a fraud or deceit upon the purchasers
of such securities.
107. Defendants Shumake, Jackson, Birch, and 420 Real Estate acted
knowingly, recklessly, and/or negligently, in engaging in the conduct described
above.
Jackson, Birch, and 420 Real Estate violated Section 17(a) of the Securities Act
[15 U.S.C. § 77q(a)].
COUNT II
Violations of Section 10(b) of the Exchange Act
and Exchange Act Rule 10b-5
[15 U.S.C. § 78j(b) and 17 C.F.R. 240.10b-5]
(Shumake, Jackson, Birch and 420 Real Estate)
109. Paragraphs 1 through 10474 are realleged and incorporated by
reference.
Jackson, Birch, and 420 Real Estate, in connection with the purchase and sale of
securities, by the use of the means and instrumentalities of interstate commerce and
by the use of the mails, directly and indirectly, employed devices, schemes and
artifices to defraud; made untrue statements of material fact and omitted to state
material facts necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and engaged in acts,
- 28 -
practices and courses of business which operated or would have operated as a fraud
and deceit upon purchasers and sellers and prospective purchasers and sellers of
securities.
111. Defendants Shumake, Jackson, Birch, and 420 Real Estate acted
knowingly and/or recklessly, in engaging in the fraudulent conduct described
above.
112. Through the foregoing, Defendants Shumake, Jackson, Birch, and 420
Real Estate violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and
Rule 10b-5 thereunder [17 C.F.R. 240.10b-5].
COUNT III
Violations of Section 5(a) and (c) of the Securities Act
[15 U.S.C. § 77e(a) and (c)]
(Shumake and Birch as to Transatlantic Real Estate)
reference.
114. From in or about September 2018 through in or about June 2019,
Defendants Shumake and Birch directly or indirectly, as to securities of
Transatlantic Real Estate: (a) made use of the means or instruments of
transportation or communication in interstate commerce or of the mails to sell
securities through the use or medium of a prospectus or otherwise; or carried
securities or caused such securities to be carried through the mails or in interstate
commerce, by means or instruments of transportation, for the purpose of sale or

- 29 -
delivery after sale; and (b) made use of the means or instruments of transportation
or communication in interstate commerce or of the mails to offer to sell or to offer
to buy, through the use or medium of any prospectus or otherwise, securities
without a registration statement having been filed with the SEC or being in effect
as to such securities.
115. No registration statements were filed with the SEC or were in effect in
connection with offers or sales of securities of Transatlantic Real Estate by
Defendants Shumake and Birch, and no exemption from the registration
requirements applied to Defendant Shumake’s and Birch’s sales.
116. By engaging in the conduct described above, Defendants Shumake
and Birch violated, and unless restrained and enjoined are reasonably likely to
continue to violate Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a)
and (c)].
COUNT IV
Violations of Section 5(a) and (c) of the Securities Act
[15 U.S.C. § 77e(a) and (c)]
(Shumake, Jackson and 420 Real Estate)
reference.
118. From in or about July 2019 through in or about June 2020, Defendants
Shumake, Jackson and 420 Real Estate, directly or indirectly, as to securities of
Defendant 420 Real Estate: (a) made use of the means or instruments of
- 30 -
transportation or communication in interstate commerce or of the mails to sell
securities through the use or medium of a prospectus or otherwise; or carried
securities or caused such securities to be carried through the mails or in interstate
commerce, by means or instruments of transportation, for the purpose of sale or
delivery after sale; and (b) made use of the means or instruments of transportation
or communication in interstate commerce or of the mails to offer to sell or to offer
to buy, through the use or medium of any prospectus or otherwise, securities
without a registration statement having been filed with the SEC or being in effect
as to such securities.
119. No registration statements were filed with the SEC or were in effect in
connection with offers or sales of securities of Defendant 420 Real Estate by
Defendants Shumake, Jackson or 420 Real Estate, and no exemption from the
registration requirements applied to the sales by Defendant Shumake, Jackson, and
420 Real Estate.
Jackson, and 420 Real Estate violated, and unless restrained and enjoined are
reasonably likely to continue to violate Sections 5(a) and (c) of the Securities Act
[15 U.S.C. §§ 77e(a) and (c)].
COUNT V
Aiding and Abetting Violations of
Section 17(a) of the Securities Act
[15 U.S.C. § 77q(a)]
- 31 -
(Shumake)
121. Paragraphs 1 through 74 above74104 are realleged and incorporated
by reference.
122. As described above, Defendants Jackson and Birch, in the offer and
sale of securities, respectfully, of 420 Real Estate and Transatlantic Real Estate, by
the use of the means and instruments of transportation or communication in
interstate commerce or by use of the mails, directly or indirectly, have employed
devices, schemes and artifices to defraud; obtained money and property by means
of untrue statements of material facts and omissions to state material facts
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading; and engaged in transactions,
practices, and courses of business which operated or would operate as a fraud or
deceit upon the purchasers of such securities.
123. By engaging in the conduct described, Defendants Jackson and Birch
violated Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
124. Defendant Shumake knowingly and/or recklessly provided
substantial assistance to Defendants Jackson and Birch.
125. By reason of the foregoing, Defendant Shumake aided and abetted the
violations of Section 17(a) of the Securities Act, by Defendants Jackson and Birch
and, pursuant to Section 15(b) of the Securities Act [15 U.S.C. § 77o(b)],
- 32 -
Defendant Shumake is liable to the same extent as Defendants Jackson and Birch
for their violations of Section 17(a) of the Securities Act.
COUNT VI
Section 10(b) of the Exchange Act
and Exchange Act Rule 10b-5
[15 U.S.C. § 78j(b) and 17 C.F.R. 240.10b-5]
(Shumake)
reference.
127. As described above, Defendants Jackson and Birch in connection with
the purchase and sale of securities, respectfully, of 420 Real Estate and
Transatlantic Real Estate, by the use of the means and instrumentalities of
interstate commerce and by the use of the mails, directly and indirectly, employed
devices, schemes and artifices to defraud; made untrue statements of material fact
and omitted to state material facts necessary in order to make the statements made,
in the light of the circumstances under which they were made, not misleading; and
engaged in acts, practices and courses of business which operated or would have
operated as a fraud and deceit upon purchasers and sellers and prospective
purchasers and sellers of securities.
violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. 240.10b-5].

- 33 -
129. Defendant Shumake knowingly and/or recklessly provided substantial
assistance to Defendants Jackson and Birch.
violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by
Defendants Jackson and Birch and, pursuant to Section 20(e) of the Exchange Act
[15 U.S.C. § 78t(e)], Defendant Shumake is liable to the same extent as Defendants
Jackson and Birch for their violations of Sections 10(b) of the Exchange Act and
Rule 10b-5 thereunder.
COUNT VII
Sections 5(a) and (c) of the Securities Act
[15 U.S.C. §§ 77e(a) and (c)]
(Shumake)
131. Paragraphs 1 through 104 are realleged and incorporated by reference.
132. As described, Defendants Jackson and Birch offered and sold
securities of, respectfully, 420 Real Estate and Transatlantic Real Estate, when no
registration statements were filed with the SEC or were in effect in connection with
offers or sales of securities of either issuer, and no exemption from the registration
requirements applied to Defendants’ sales.
violated Sections 5(a) and (c) of the Securities Act [15 U.S.C. §§ 77e(a) and (c)].
- 34 -
134. Defendant Shumake knowingly and/or recklessly provided substantial
assistance to the unregistered offers and sales by Defendants Jackson and Birch.
violations of Section 5(a) and 5(c) of the Securities Act, by Defendants Jackson
and Birch and, pursuant to Section 15(b) of the Securities Act [15 U.S.C. §
77o(b)], Defendant Shumake is liable to the same extent as Defendants Jackson
and Birch for their violations of Sections 5(a) and (c) of the Securities Act.
COUNT VIII
Violations of Section 4A(a)(5) of the Securities Act and
Rules 301(c)(2) Thereunder
[15 U.S.C. § 77d–1(a)(5) and 17 C.F.R. 17 C.F.R. § 227.301(c)(2)]
(Petrescu and TruCrowd)
136. Paragraphs 1 through 104 are realleged and incorporated by reference.
137. In connection with the Transatlantic Real Estate and 420 Real Estate
crowdfunding offerings, Defendant TruCrowd was an intermediary, and Petrescu
was an associated person of an intermediary, for purposes of Section 4A of the
Securities Act [15 U.S.C. § 77d–1] and Rules 300(c)(1) and 300(c)(3) thereunder
[17 C.F.R. §§ 227.300(c)(1) and 227.300(c)(3)].
138. As described above, Defendants Petrescu and TruCrowd allowed
Defendants access to TruCrowd’s crowdfunding platform in connection with the
Transatlantic Real Estate and 420 Real Estate crowdfunding offerings.
- 35 -
139. As described in Paragraphs 75 through 104, above, Defendants
Petrescu and TruCrowd (1) had a reasonable basis for believing that the
Transatlantic Real Estate and 420 Real Estate crowdfunding offerings presented
the potential for fraud and otherwise raised concerns about investor protection; (2)
reasonably believed, or should have reasonably believed, that they were unable to
adequately or effectively assess the risk of fraud associated with the Transatlantic
Real Estate and 420 Real Estate crowdfunding offerings; and (3) became aware of
information, after they had granted access to the TruCrowd crowdfunding platform
for the Transatlantic Real Estate and 420 Real Estate crowdfunding offerings, that
caused them to reasonably believe, or in the exercise of reasonable care should
have caused them to reasonably believe, that the Transatlantic Real Estate and 420
Real Estate crowdfunding offerings presented the potential for fraud and otherwise
raised concerns about investor protection.
140. As described above, Defendants Petrescu and TruCrowd failed to
deny access to TruCrowd’s crowdfunding platform and failed to promptly remove
the Transatlantic Real Estate and 420 Real Estate offerings from TruCrowd’s
crowdfunding platform, cancel the offerings, and return and direct the return of any
funds that had been committed by investors in the offerings.
141. By reason of the foregoing, Defendants TruCrowd and Petrescu have
violated, and unless restrained and enjoined are reasonably likely to continue to
- 36 -
violate, Section 4A(a)(5) of the Securities Act [15 U.S.C. § 77d–1(a)(5)] and Rule
301(c)(2) thereunder [17 C.F.R. § 227.301(c)(2)].
RELIEF REQUESTED
THEREFORE, the SEC requests that this Court:
I.
Permanently enjoin Defendants Shumake, Jackson, Birch, and 420 Real
Estate, their officers, agents, servants, employees, attorneys and those persons in
active concert or participation with Defendants who receive actual notice of the
order of this Court, by personal service or otherwise, and each of them from,
directly or indirectly, engaging in the transactions, acts, practices or courses of
business described above, or in conduct of similar purport and object, in violation
of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]; Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 CFR § 240.10b-
5]; and Section 5 of the Securities Act [15 U.S.C. § 77e];
II.
Permanently enjoin Defendants Petrescu and TruCrowd, their officers,
agents, servants, employees, attorneys and those persons in active concert or
participation with Defendants who receive actual notice of the order of this Court,
by personal service or otherwise, and each of them from, directly or indirectly,
engaging in the transactions, acts, practices or courses of business described above,
- 37 -
or in conduct of similar purport and object, in violation of Section 4A of the
Securities Act [15 U.S.C. § 77d–1] and Rules 300(c)(1) and 300(c)(3) thereunder
[17 C.F.R. §§ 227.300(c)(1) and 227.300(c)(3)];
III.
Ordering Defendants to disgorge all ill-gotten gains and/or unjust
enrichment received directly or indirectly, with pre-judgment interest thereon, as a
result of the alleged violations, pursuant to Exchange Act Sections 21(d)(5) and
21(d)(7) [15 U.S.C. §§ 78u(d)(5) and 78u(d)(7)];
IV.
Order Defendants to pay civil penalties pursuant to Section 20(d) of the
Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)];
V.
Enter an Order, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C.
§ 78u(d)(2)] permanently prohibiting Defendants Shumake, Jackson, and Birch
from serving as an officer or director of any issuer that has a class of securities
registered pursuant to Section 12 [15 U.S.C. § 78l] of the Exchange Act or that is
required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. §
78o(d)]; and
- 38 -
VI.
Grant any other relief this Court deems appropriate.
- 39 -
JURY DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff
demands that this case be tried to a jury.
Dated: September 20, 2021 Respectfully Submitted,
UNITED STATES SECURITIES

AND EXCHANGE COMMISSION
s/John E. Birkenheier
John E. Birkenheier, Illinois Bar No. 6270993
Jerrold H. Kohn, Illinois Bar No. 6188085
Dante A. Roldàn, Illinois Bar No. 6316972
U.S. Securities and Exchange Commission

Chicago Regional Office
175 West Jackson Blvd., Suite 1450
Chicago, Illinois 60604
(312) 353-7390
(312) 353-7398 (facsimile)
BirkenheierJ@sec.gov
KohnJ@sec.gov
RoldanD@sec.gov
Saima S. Mohsin, Acting United States Attorney

Peter A. Caplan, Assistant United States Attorney
211 W. Fort Street, Suite 2001
Detroit, MI 48226
(313) 226-9784
P-30643
Peter.Caplan@usdoj.gov
Attorneys for Plaintiff
- 40 -

Shumake Crowdfunding Complaint From SEC

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Case 2:21-cv-12193-MFL-APP ECF No. 1, PageID.

1 Filed 09/20/21 Page 1 of 40

UNITED STATES DISTRICT COURT

UNITED STATES SECURITIES

Plaintiff, the United States Securities and Exchange Commission (“SEC”),

1. The SEC brings this action to remedy two fraudulent crowdfunding

offerings conducted by Defendants Robert Samuel Shumake. Jr. (“Shumake”),

Willard L. Jackson (“Jackson”), and Nicole T. Birch (“Birch).

2. The issuers of the securities that were fraudulently sold to members of

defunct company named Transatlantic Real Estate, LLC (“Transatlantic Real

offerings on a crowdfunding platform hosted by Defendant TruCrowd, Inc.

(“TruCrowd”). TruCrowd’s CEO, Defendant Vicent Petrescu, aka Vincent

TruCrowd’s platform to conduct crowdfunding offerings. Under the SEC’s

crowdfunding regulations, Petrescu and TruCrowd served as gatekeepers and, as

4. Shumake and Birch offered and sold securities of Transatlantic Real

in the same roles for 420 Real Estate.

6. Shumake, along with Birch and Jackson, marketed both offerings as

by acquiring real estate and leasing it to companies engaged in the business of

7. Shumake, Birch, and Jackson made multiple false and misleading

representations and omissions to investors in connection with the crowdfunding

improve cannabis real estate. None of the investors in either crowdfunding

recovered any of the funds they invested.

JURISDICTION AND VENUE

(“Exchange Act”) [15 U.S.C. §§78u(d) and 78aa(a)].

9. Venue is proper in this judicial district pursuant to Section 22(a) of the

constituting the violations alleged in this Complaint occurred within the

jurisdiction of this district.

10. In connection with the conduct alleged in this Complaint, the

instrumentalities of transportation or communication in interstate commerce.

11. Robert S. Shumake, age 53, resides in Bloomfield Hills. In

December 2017, Shumake pled guilty to two misdemeanor violations of the

sentenced Shumake to a probationary period of 18 months, during which time

(“Shumoja”), a purported marketing services company, which received money in

connection with the crowdfunding offerings.

12. Willard L. Jackson, age 57, resides in Houston, Texas. Jackson

Estate offering to the Jackson Entities.

13. Nicole T. Birch, age 46, resides in Gainesville, Georgia. Birch is a

Jackson. 420 Real Estate raised $888,180 through a crowdfunding offering

15. TruCrowd, Inc. dba Fundanna is a Delaware corporation with its

principal place of business in Chicago, Illinois. TruCrowd is an SEC-registered

funding portal for crowdfunding offerings. TruCrowd hosted the crowdfunding

16. Vicent Petrescu, aka Vincent Petrescu, age 49, resides in

Algonquin, Illinois. Petrescu, a licensed CPA, is the founder and CEO of

to TruCrowd’s platform to conduct the crowdfunding offerings.

17. Transatlantic Real Estate, LLC was a California limited liability

cannabis industry. Transatlantic Real Estate raised $1,020,100 through a

crowdfunding offering between September 2018 and May 2019 (“Transatlantic

a Certificate of Cancellation with the California Secretary of State, which

terminated its status as a limited liability company.

of business in Grosse Pointe Farms. Bangi is a publicly traded company that

cannabis industry. Bangi’s common stock trades in the over-the-counter market

the CEO of Bangi.

Shumake Explores Various Means to Raise Money through Securities

cannabis industries. Ultimately, he pursued crowdfunding offerings as a means to

20. Crowdfunding offerings are governed by the securities transaction

Regulation Crowdfunding thereunder [17 C.F.R. § 227.100, et seq.]. From 2018

through 2020—the years relevant to this Complaint—these crowdfunding

provisions allowed an unregistered offering of up to $1,070,000 through an

intermediary’s platform on the internet. Prior to the start of the crowdfunding

offering statement. For instance, issuers relying on the crowdfunding registration