SEC Charges Cannabis Real Estate Crowdfunding Organizers With Fraud

The Securities and Exchange Commission has charged three people with fraud to sell nearly $ 2 million in unregistered securities through two crowdfunding offers. The agency has also alleged that a registered funding portal and its CEO failed to protect investors from the program.

Cannabis-related real estate can be a difficult endeavor for potential realtors with no industry knowledge.

In the complaint filed in the U.S. District Court for the Eastern District of Michigan, the agency alleges that Robert Shumake, along with associates Nicole Birch and Willard Jackson, have unregistered crowdfunding offers through two cannabis real estate companies, Transatlantic Real Estate and 420 Property.

The SEC claims that Shumake and Birch sold just over 1 million through Transatlantic Real Estate. The three then allegedly spent investor funds on themselves rather than using the funds for the purposes disclosed to investors.

Registered financing portal truCrowd Inc. and its CEO Vincent Petrescu hosted the Transatlantic Real Estate and 420 Real Estate offers. Petrescu reportedly failed to warn investors about the risk of fraud by keeping silent about Shumake’s criminal history.

The SEC move is notable because it is the first crowdfunding-related action, writes Cadwalader, Wickersham & Taft Associate Charles Munn. Raising money for investments through crowdfunding was legalized by the JOBS Act of 2012 and has since grown in popularity as a source of finance for real estate investments.