U.S. financial authorities have launched a lawsuit against a cannabis-related investment program that is believed to be the first case involving crowdfunding regulation.
The Securities and Exchange Commission (SEC) filed a lawsuit against three people – named Robert Shumake Jr, Willard Jackson, and Nicole Birch – and Texas firm 420 Real Estate in Eastern Michigan District Court, claiming the trio had been involved in the sale of nearly $ 2 million in unregistered securities through two crowdfunding programs.
The SEC also accused the registered funding portal that hosted the offerings – TruCrowd – and its CEO Vicent Petrescu (name spelled as indicated), of violating Section 4A (a) (5) of the Securities Act and of having violated crowdfunding rules, alleging that they “served as gatekeepers and, as such, were responsible for taking action to reduce the risk of fraud.” “
In papers filed yesterday [PDF], Shumake, Jackson and Birch have been accused of marketing the two offers as “opportunities for investors to share the abundant profits of the cannabis industry, by acquiring real estate and leasing it to companies engaged in the cultivation of the cannabis industry. cannabis”.
However, the complaint filed by the SEC claimed that none of the funds raised were used to “acquire or improve cannabis-related real estate,” as reported.
“None of the investors in either of the crowdfunding offerings received any return on their investment, and few investors got back the funds they invested,” the watchdog said.
Shumake, Birch and Jackson are all accused of violating anti-fraud and registration laws, with the SEC alleging that “they embezzled hundreds of thousands of dollars of the proceeds of the offering for their personal gain.”
The watchdog asked for financial sanctions and injunctions preventing them from exercising their duties as corporate officers.
In a statement announcing the news, Gurbir Grewal, director of the SEC’s Division of Enforcement, said that as companies continue to raise funds through crowdfunding, she will continue to ensure that all those involved are “accountable” and, if necessary, “enforce the protections in place for all investors.”
Last year, the SEC relaxed the rules around crowdfunding limits, raising the cap from $ 1 million to $ 5 million.
TruCrowd said The register: “We believe that we have a good defense against the allegations set out in the complaint, and it should be noted that there is no allegation of fraud against TruCrowd or [Vincent] Petrescu. “®