Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.1 Filed 09/20/21 Page 1 of 40
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
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`UNITED STATES SECURITIES
`AND EXCHANGE COMMISSION,
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`Plaintiff,
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`v.
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`ROBERT SAMUEL SHUMAKE, JR.,
`WILLARD L. JACKSON,
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`NICOLE T. BIRCH,
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`420 REAL ESTATE, LLC,
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`VICENT PETRESCU
`aka VINCENT PETRESCU, and
`TRUCROWD, INC. dba FUNDANNA,
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`Defendants.
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`_____________________________________/
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`Case No. 21-cv-12193
`Hon.
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` JURY TRIAL DEMANDED
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`COMPLAINT
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`Plaintiff, the United States Securities and Exchange Commission (“SEC”),
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`alleges as follows:
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`SUMMARY OF ACTION
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`1.
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`The SEC brings this action to remedy two fraudulent crowdfunding
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`offerings conducted by Defendants Robert Samuel Shumake. Jr. (“Shumake”),
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`Willard L. Jackson (“Jackson”), and Nicole T. Birch (“Birch).
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
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`UNITED STATES SECURITIES
`AND EXCHANGE COMMISSION,
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`Plaintiff,
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`v.
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`ROBERT SAMUEL SHUMAKE, JR.,
`WILLARD L. JACKSON,
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`NICOLE T. BIRCH,
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`420 REAL ESTATE, LLC,
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`VICENT PETRESCU
`aka VINCENT PETRESCU, and
`TRUCROWD, INC. dba FUNDANNA,
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`Defendants.
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`_____________________________________/
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`Case No. 21-cv-12193
`Hon.
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` JURY TRIAL DEMANDED
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`COMPLAINT
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`Plaintiff, the United States Securities and Exchange Commission (“SEC”),
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`alleges as follows:
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`SUMMARY OF ACTION
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`1.
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`The SEC brings this action to remedy two fraudulent crowdfunding
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`offerings conducted by Defendants Robert Samuel Shumake. Jr. (“Shumake”),
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`Willard L. Jackson (“Jackson”), and Nicole T. Birch (“Birch).
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.2 Filed 09/20/21 Page 2 of 40
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`2.
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`The issuers of the securities that were fraudulently sold to members of
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`the public were Defendant 420 Real Estate, LLC (“420 Real Estate”) and a now
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`defunct company named Transatlantic Real Estate, LLC (“Transatlantic Real
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`Estate”).
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`3.
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`Transatlantic Real Estate and 420 Real Estate raised funds through
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`offerings on a crowdfunding platform hosted by Defendant TruCrowd, Inc.
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`(“TruCrowd”). TruCrowd’s CEO, Defendant Vicent Petrescu, aka Vincent
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`Petrescu (“Petrescu”), was responsible for selecting which issuers could use
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`TruCrowd’s platform to conduct crowdfunding offerings. Under the SEC’s
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`crowdfunding regulations, Petrescu and TruCrowd served as gatekeepers and, as
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`such, were responsible for taking measures to reduce the risk of fraud.
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`4.
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`Shumake and Birch offered and sold securities of Transatlantic Real
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`Estate from September 2018 through May 2019. Shumake and Jackson offered
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`and sold securities of 420 Real Estate from May 2019 through June 2020.
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`5.
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`Shumake was the driving force behind the both offerings, but he kept
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`his participation secret in order to hide a past criminal conviction arising from a
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`mortgage fraud scheme. Shumake convinced Birch to act as the chief executive
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`officer and sole member of Transatlantic Real Estate and convinced Jackson to act
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`in the same roles for 420 Real Estate.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.3 Filed 09/20/21 Page 3 of 40
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`6.
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`Shumake, along with Birch and Jackson, marketed both offerings as
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`opportunities for investors to share in bountiful profits from the cannabis industry,
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`by acquiring real estate and leasing it to companies engaged in the business of
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`growing cannabis.
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`7.
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`Shumake, Birch, and Jackson made multiple false and misleading
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`representations and omissions to investors in connection with the crowdfunding
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`offerings. Among other things, they concealed Shumake’s past criminal history
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`and his leading role in both offerings. And to make matters worse, they diverted
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`hundreds of thousands of dollars from the offering proceeds for their personal
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`benefit. None of the money raised in either offering was used to acquire or
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`improve cannabis real estate. None of the investors in either crowdfunding
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`offering has received any return on their investment, and few investors have
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`recovered any of the funds they invested.
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`JURISDICTION AND VENUE
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`8.
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`The Court has jurisdiction over this action pursuant to Sections 20(b)
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`and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and
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`77v(a)], and Sections 21(d) and 27(a) of the Securities Exchange Act of 1934
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`(“Exchange Act”) [15 U.S.C. §§78u(d) and 78aa(a)].
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`9.
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`Venue is proper in this judicial district pursuant to Section 22(a) of the
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`Securities Act [15 U.S.C. § 77v(a)] and Section 27(a) of the Exchange Act [15
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.4 Filed 09/20/21 Page 4 of 40
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`U.S.C. § 78aa(a)], because many of the acts, transactions and courses of business
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`constituting the violations alleged in this Complaint occurred within the
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`jurisdiction of this district.
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`10.
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`In connection with the conduct alleged in this Complaint, the
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`Defendants, directly and indirectly, have made use of the mails and/or means or
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`instrumentalities of transportation or communication in interstate commerce.
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`DEFENDANTS
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`11. Robert S. Shumake, age 53, resides in Bloomfield Hills. In
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`December 2017, Shumake pled guilty to two misdemeanor violations of the
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`Michigan Credit Services Protection Act, and on behalf of his business, to two
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`felony counts of obtaining money by false pretense, for improperly taking upfront
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`fees for mortgage audit services that he promised, but failed to deliver (People v.
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`Shumake, et al., Mich. 46th Jud. Dist. (Feb. 15, 2017)). The presiding court
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`sentenced Shumake to a probationary period of 18 months, during which time
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`Shumake was forbidden to work in a position where he could have “direct control
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`over, or access to, another person’s money.” Shumake ignored the terms of his
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`probation sentence. Before his probation ended in May 2019, he conducted the
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`Transatlantic Real Estate offering with Birch and set in motion the 420 Real Estate
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`offering with Jackson. Shumake owns and controls Shumoja Media Group, LLC
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.5 Filed 09/20/21 Page 5 of 40
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`(“Shumoja”), a purported marketing services company, which received money in
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`connection with the crowdfunding offerings.
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`12. Willard L. Jackson, age 57, resides in Houston, Texas. Jackson
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`serves as the CEO and the sole director of 420 Real Estate. Jackson previously
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`served as a director of Bangi, Inc., described below. Jackson also held ownership
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`interests in WLJ Group, LLC and Ebony Media Holdings, LLC, (collectively, the
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`“Jackson Entities”). Jackson facilitated the payment of money from the 420 Real
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`Estate offering to the Jackson Entities.
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`13. Nicole T. Birch, age 46, resides in Gainesville, Georgia. Birch is a
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`licensed attorney in Georgia and has her own law practice, H.B. Associates P.C.
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`(“H.B. Associates”). Birch has served as CEO and sole director of both
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`Transatlantic Real Estate and Bangi, Inc. Birch facilitated the payment of money
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`from the Transatlantic Real Estate offering to herself and to H.B. Associates.
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`14.
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`420 Real Estate, LLC is a Texas limited liability company formed in
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`April 2019 with its principal place of business in Houston, Texas. 420 Real Estate
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`purports to be a real estate company that specializes in the acquisition and leasing
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`of properties that support the hemp industry. 420 Real Estate is owned by Willard
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`Jackson. 420 Real Estate raised $888,180 through a crowdfunding offering
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`between May 2019 and June 2020 (“420 Real Estate offering”).
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.6 Filed 09/20/21 Page 6 of 40
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`15. TruCrowd, Inc. dba Fundanna is a Delaware corporation with its
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`principal place of business in Chicago, Illinois. TruCrowd is an SEC-registered
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`funding portal for crowdfunding offerings. TruCrowd hosted the crowdfunding
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`offerings for Transatlantic Real Estate and 420 Real Estate through its platform.
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`16. Vicent Petrescu, aka Vincent Petrescu, age 49, resides in
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`Algonquin, Illinois. Petrescu, a licensed CPA, is the founder and CEO of
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`TruCrowd. Petrescu granted Transatlantic Real Estate and 420 Real Estate access
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`to TruCrowd’s platform to conduct the crowdfunding offerings.
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`RELATED ENTITIES
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`17. Transatlantic Real Estate, LLC was a California limited liability
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`company formed in August 2018 with its principal place of business in Grosse
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`Pointe Farms. Transatlantic Real Estate purported to be a real estate company that
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`specialized in the acquisition and leasing of properties that support the medical
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`cannabis industry. Transatlantic Real Estate raised $1,020,100 through a
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`crowdfunding offering between September 2018 and May 2019 (“Transatlantic
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`Real Estate offering”). According to the offering statement for the Transatlantic
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`Real Estate offering, Birch was the one hundred percent owner, CEO, chairman,
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`and sole director of the company. On July 9, 2021, Transatlantic Real Estate filed
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`a Certificate of Cancellation with the California Secretary of State, which
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`terminated its status as a limited liability company.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.7 Filed 09/20/21 Page 7 of 40
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`18. Bangi, Inc. (“Bangi”) is a Nevada corporation with its principal place
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`of business in Grosse Pointe Farms. Bangi is a publicly traded company that
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`purports to specialize in the acquisition and leasing of properties that support the
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`cannabis industry. Bangi’s common stock trades in the over-the-counter market
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`under the symbol “BNGI.” According to Bangi’s most recent SEC filing, Birch is
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`the CEO of Bangi.
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`FACTS
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`Shumake Explores Various Means to Raise Money through Securities
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`Offerings
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`19. Following his guilty plea, but before the end of his probationary
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`period and the court order prohibiting him from having access to other people’s
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`money, Shumake began taking steps to raise money from the public to enter the
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`cannabis industries. Ultimately, he pursued crowdfunding offerings as a means to
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`raise funds.
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`20. Crowdfunding offerings are governed by the securities transaction
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`registration provisions of the Securities Act [17 U.S.C. §§ 77(a), et seq.] and
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`Regulation Crowdfunding thereunder [17 C.F.R. § 227.100, et seq.]. From 2018
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`through 2020—the years relevant to this Complaint—these crowdfunding
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`provisions allowed an unregistered offering of up to $1,070,000 through an
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`intermediary, in this case, a funding portal registered under Rule 400 of Regulation
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.8 Filed 09/20/21 Page 8 of 40
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`Crowdfunding. Issuers could offer and sell their securities through the
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`intermediary’s platform on the internet. Prior to the start of the crowdfunding
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`offering, the issuer was required to file with the SEC a “Form C,” and disclose
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`certain information about the issuer and the offering through the Form C and
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`offering statement. For instance, issuers relying on the crowdfunding registration
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`exemption were required to disclose, among other information, the names of all the
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`issuer’s officers, directors, and persons occupying a similar status or performing a
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`similar function; the purpose and intended use of the offering proceeds; related-
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`party transactions with the issuer’s officers and promoters that are, in the
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`aggregate, in excess of five percent of the aggregate capital that the issuer seeks to
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`raise; and any material information necessary in order to make the statements made
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`not misleading, in light of the circumstances under which they were made.
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`Regulation Crowdfunding also requires that the funding portal post the offering
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`statement for each issuer on its internet platform so that all prospective investors
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`have access to the same information relating to the issuer’s offering.
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`21.
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`In September 2018, Shumake enlisted Birch, an attorney with whom
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`he was in a personal relationship, to form Transatlantic Real Estate, with Birch
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`holding the positions of CEO and sole member. Shumake also convinced Birch to
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`raise funds through a crowdfunding offering and to hide Shumake’s involvement.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.9 Filed 09/20/21 Page 9 of 40
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`22. Transatlantic Real Estate’s mailing address was a UPS store in Grosse
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`Pointe Farms, near where Shumake lived, rather than in Georgia where Birch lived.
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`23. Shumake set up Bangi in November 2018, while he was working with
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`Birch to conduct the Transatlantic Real Estate crowdfunding offering. Bangi’s
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`address at the time was the same UPS store in Grosse Pointe Farms that
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`Transatlantic Real Estate used.
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`24. According to its website, Bangi “acquires specialized assets including
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`hemp and cannabis farms, dispensaries, commercial real estate, industrial real
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`estate, and leases real estate to the multi-billion dollar and growing cannabis
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`industry.”
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`25. Shumake regularly attended and participated in Bangi Board
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`meetings, gave direction to the company’s officers and directors, and conducted
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`business on behalf of Bangi. Board minutes identify Shumake as the founder of
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`Bangi. Bangi Directors and Shumake discussed his criminal history and its
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`potential impact on prospective investors. Despite his involvement in the affairs of
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`Bangi, Shumake elected not to serve as an officer or director of the company. Nor
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`was he listed on Bangi’s website.
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`26. Shumake explored the possibility of Bangi conducting an offering
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`under SEC Regulation A+ [17 C.F.R. § 230.251, et seq.], which permitted higher
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.10 Filed 09/20/21 Page 10 of 40
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`fundraising amounts than those allowed under Regulation Crowdfunding.
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`Ultimately, an offering for Bangi never occurred.
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`27.
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`In April 2019, Shumake enlisted Jackson, a friend and Bangi director,
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`to form 420 Real Estate, with Jackson as the CEO and sole member. Shumake
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`convinced Jackson to utilize 420 Real Estate as a vehicle for raising funds through
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`a crowdfunding offering (the “420 Real Estate offering”). Shumake also
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`convinced Jackson to hide Shumake’s involvement in the 420 Real Estate offering.
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`28. Shumake discussed with Jackson his plans to use money raised
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`through the 420 Real Estate offering to fund Bangi.
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`29. Shumake’s name was not on any of the offering documents for
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`Transatlantic Real Estate or 420 Real Estate. Shumake, Jackson, and Birch all
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`knew that the disclosure of Shumake’s criminal past could hinder fundraising.
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`Therefore, they concealed Shumake’s involvement, and Birch and Jackson falsely
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`held themselves out as the sole persons with authority over the offerings.
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`The Transatlantic Real Estate Offering and Misuse of Investor Proceeds
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`30. Shumake arranged for TruCrowd to serve as the crowdfunding portal
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`for the Transatlantic Real Estate offering.
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`31. Birch, with Petrescu’s assistance, wrote the Transatlantic Real Estate
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`Form C and offering statement. Birch and Petrescu kept Shumake informed about
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`the drafting process by copying him on substantive email discussions about the
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.11 Filed 09/20/21 Page 11 of 40
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`offering statement. Birch, Shumake, and Petrescu also each weighed in on the
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`steps necessary to kick off and promote the Transatlantic Real Estate offering to
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`investors.
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`32. Transatlantic Real Estate filed the Form C and offering statement with
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`the SEC on September 12, 2018. Birch signed the Form C as the company’s sole
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`officer.
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`33. The Form C and offering statement omitted any mention of
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`Shumake’s involvement in the company or the offering. Rather, to conceal
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`Shumake’s criminal record, his name did not appear on any of the documents
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`associated with the Transatlantic Real Estate offering. Birch falsely held herself
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`out as the sole person with authority over the company and the offering.
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`34. Shumake and Birch knew that disclosure of Shumake’s criminal past
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`could hinder fundraising.
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`35. According to the Transatlantic Real Estate offering statement, the
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`company was a diversified investment vehicle that acquired and leased specialized
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`real estate assets. Its strategy was to acquire industrial real estate that could be
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`used as medical cannabis cultivation facilities.
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`36. The Transatlantic Real Estate offering statement represented that the
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`company was offering a maximum of 10,700 convertible notes for $100 each, and
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`that each subscription consisted of a “15% convertible Note . . . that mature[d]
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.12 Filed 09/20/21 Page 12 of 40
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`eighteen months from the date of issuance, and, at [the] company’s option, [was]
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`convertible at a 10% discount into the public market.”
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`37. The Transatlantic Real Estate offering statement represented that,
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`after expenses, the company intended to use the offering proceeds as follows: (1)
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`$194,740 for marketing; (2) $97,370 for legal fees; (3) $584,220 for property
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`improvement; and (4) $97,370 in administrative fees.
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`38. The Transatlantic Real Estate offering statement contained several
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`materially false and misleading statements, including the following:
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`a. Transatlantic Real Estate employed a senior management team that
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`had significant experience in the real estate industry and
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`sophisticated finance and capital markets expertise;
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`b. Transatlantic Real Estate had contingently acquired a 9-plus acre
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`property with 80,000 Square Foot Green Houses located in
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`California; and
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`c. Transatlantic Real Estate would use $584,220 of the proceeds for
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`“property improvement.”
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`d. Transatlantic Real Estate was not a party to any proposed
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`transaction with an officer, director or promoter of which such
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`party would receive in excess of 5% of the aggregate amount of
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`capital Transatlantic Real Estate intended to raise in the offering.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.13 Filed 09/20/21 Page 13 of 40
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`e. Transatlantic Real Estate only had one individual who was the
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`company’s officer, director, or “person occupying similar status or
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`performing a similar function.”
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`39. All of these statements were false and misleading.
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`40. Transatlantic Real Estate never acquired any real estate and did not
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`use any of the offering proceeds to purchase or improve any property.
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`41. As for the management of Transatlantic Real Estate, Birch had no
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`experience in the real estate industry or sophisticated finance and capital markets
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`expertise and did not employ any individuals, let alone a “team” with such
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`experience on behalf of Transatlantic Real Estate.
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`42. The offering statement failed to disclose either Shumake’s criminal
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`record or that he would be actively involved in raising funds from investors and
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`managing the company.
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`43. Shumake co-managed Transatlantic Real Estate with Birch and was
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`extensively involved in the company’s strategic decisions. For instance, Shumake:
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`a. directed communications with current and prospective investors;
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`b. lined up a transfer agent for Transatlantic Real Estate;
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`c. helped prepare documents and promote the offering;
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`d. solicited Transatlantic Real Estate advertisements from third
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`parties and drafted advertising scripts for social media; and
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.14 Filed 09/20/21 Page 14 of 40
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`e. gave directions to Birch as to the disbursement of investor money
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`from Transatlantic Real Estate’s bank account.
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`44. From September 2018 through May 2019, Transatlantic Real Estate
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`raised $1,020,100 from approximately 2,000 investors in multiple states through
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`TruCrowd’s platform. The convertible notes that Transatlantic Real Estate offered
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`and sold to the investing public through TruCrowd were securities.
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`45. Birch and Shumake diverted the investors’ money for purposes
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`unrelated to Transatlantic Real Estate, including hundreds of thousands of dollars
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`transferred to Birch and her entity, H.B. Associates, and to Shumake and his entity,
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`Shumoja.
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`46. Shumake and Birch diverted $358,311–or 35% of the total offering
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`proceeds—to Birch and her firm, H.B. Associates.
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`47. Shumake and Birch diverted $304,709—or 30% of the total offering
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`proceeds—to Shumake and his company, Shumoja.
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`48. The Transatlantic Real Estate offering statement disclosed the
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`possibility of related party transactions, but stated those transactions would be
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`“consistent with the duties of the management of the Company to its shareholders.”
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`49. Birch and Shumake did not use any investor funds to buy or improve
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`property.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.15 Filed 09/20/21 Page 15 of 40
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`50. The Transatlantic Real Estate investors have not received any
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`monetary return on their investment.
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`The 420 Real Estate Offering and Misuse of Investor Proceeds
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`51. Shumake arranged for TruCrowd to serve as the crowdfunding portal
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`for the 420 Real Estate offering and put Jackson in touch with Petrescu.
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`52.
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`Jackson knew little about crowdfunding and relied on Shumake to
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`take the necessary steps for 420 Real Estate to conduct its crowdfunding offering.
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`Shumake told Jackson, a Bangi Director, about his plan to use the proceeds raised
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`from the 420 Real Estate offering to fund Bangi.
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`53. While Shumake was deeply involved in arranging the offering, he
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`persuaded Jackson to hide Shumake’s role with 420 Real Estate because of his
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`criminal history.
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`54. Petrescu and others participated in the drafting of the 420 Real Estate
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`Form C and offering statement. Petrescu and others kept Jackson and Shumake
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`informed about the drafting process by copying him on substantive email
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`discussions about the Form C and offering statement.
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`55.
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`420 Real Estate filed its Form C and offering statement with the SEC
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`on May 7, 2019. Jackson signed the Form C as the company’s sole officer.
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`56. The 420 Real Estate Form C and offering statement omitted any
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`mention of Shumake’s involvement in the company of the offering. Rather, to
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.16 Filed 09/20/21 Page 16 of 40
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`conceal Shumake’s criminal record, his name did not appear on any of the
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`documents associated with the 420 Real Estate offering. Jackson falsely held
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`himself out as the sole person with authority over the company and the offering.
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`57. Shumake and Jackson knew that disclosure of Shumake’s criminal
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`past could hinder fundraising.
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`58. According to its offering statement, 420 Real Estate is a diversified
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`investment vehicle that acquires and leases specialized real estate assets. Its
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`strategy is to acquire industrial real estate that can be used as hemp cultivation
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`facilities.
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`59. The 420 Real Estate offering statement represented that the company
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`was offering a maximum of 10,700 convertible notes for $100 each, and that “each
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`subscription consists of a 15% Convertible Note that mature[d] eighteen months
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`from the date of issuance, and at the company’s option, [was] convertible at a 10%
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`discount into the public market.”
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`60. The 420 Real Estate offering statement represented that, after
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`expenses, 420 Real Estate intended to use investor proceeds as follows: (1)
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`$537,450 for marketing; (2) $97,370 for legal fees; (3) $278,960 for property; and
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`(4) $97,370 in administrative fees.
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`61. The 420 Real Estate offering statement did not mention Bangi or any
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`intent to use the offering proceeds for Bangi.
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.17 Filed 09/20/21 Page 17 of 40
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`62. Nearly identical to the Transatlantic Real Estate offering statement,
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`the 420 Real Estate offering statement contained several materially false and
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`misleading statements, including the following:
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`a. 420 Real Estate’s employed a senior management team that has
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`significant experience in all aspects of the real estate industry,
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`including acquisitions, dispositions, leasing, development,
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`management, and finance;
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`b. 420 Real Estate would use $278,960 of the proceeds for “property
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`improvement;”
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`c. 420 Real Estate was not a party to any proposed transaction with
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`an officer, director or promoter of which such party would receive
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`in excess of 5% of the aggregate amount of capital 420 Real Estate
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`intended to raise in the offering; and
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`d. 420 Real Estate only had one individual who was the company’s
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`officer, director, or “person occupying similar status or performing
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`a similar function.”
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`63. All of these statements were false and misleading.
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`64.
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`420 Real Estate never used any offering proceeds for “property
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`improvement.”
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.18 Filed 09/20/21 Page 18 of 40
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`65.
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`420 Real Estate did not have a senior management team—only
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`Jackson and Shumake. Jackson had no experience in the real estate industry.
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`Shumake and Jackson concealed Shumake’s criminal record and the fact that
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`Shumake would be actively involved in raising funds from investors and managing
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`the company.
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`66. Money received from investors was deposited into an account
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`managed by TruCrowd’s escrow agent. Rather than transferring the offering
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`proceeds from the escrow agent directly to 420 Real Estate, Shumake arranged for
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`the funds to be transferred to an account managed by an attorney he knew. The
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`attorney was responsible for disbursing the funds and took directions individually
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`from Shumake and Jackson.
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`67. Shumake co-managed 420 Real Estate with Jackson and was
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`extensively involved in the company’s strategic decisions. For instance, Shumake:
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`a. directed communications with current and prospective investors;
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`b. helped prepare documents and promote the offering;
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`c. solicited advertisements from third parties and drafted advertising
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`scripts for social media; and
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`d. gave directions to the attorney as to the disbursement of investor
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`moneys.
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`- 18 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.19 Filed 09/20/21 Page 19 of 40
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`68. From May 2019 through June 2020, 420 Real Estate raised
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`approximately $888,180 from the sale of convertible notes to approximately 2,000
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`investors in multiple states through the TruCrowd platform. The convertible notes
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`that 420 Real Estate offered and sold to the investing public through TruCrowd
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`were securities.
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`69. Pursuant to an agreement, Jackson and Shumake had to give their
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`joint approval for all distributions of funds from the attorney. In fact, however,
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`Shumake and Jackson each individually directed the attorney to distribute the
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`funds without the approval of the other.
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`70.
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`Jackson and Shumake diverted the investors’ money for purposes
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`unrelated to 420 Real Estate, including hundreds of thousands of dollars
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`transferred to Shumake, Shumoja, Jackson, and the Jackson Entities.
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`71. Shumake and Jackson diverted $280,608—or 32% of the total
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`offering proceeds—to Jackson and the Jackson Entities.
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`72. Shumake and Jackson diverted $114,029—or 13% of the total
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`offering proceeds—to Shumake, Shumoja, and Bangi.
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`73.
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`Jackson and Shumake did not use any investor funds to buy or
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`improve property.
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`74. The 420 Real Estate investors have not received any monetary return
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`on their investment.
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`- 19 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.20 Filed 09/20/21 Page 20 of 40
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`
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`Petrescu and TruCrowd Allowed the Offerings to Proceed Despite Warning
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`Signs of Fraud
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`75. Petrescu owned and, as TruCrowd’s owner and CEO, controlled the
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`activities of TruCrowd.
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`76. Petrescu, acting on behalf of TruCrowd, was responsible for selecting
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`which issuers and individuals could use TruCrowd’s platform to conduct
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`crowdfunding offerings.
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`77. Petrescu, acting on behalf of TruCrowd, engaged third party escrow
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`agents to hold investor funds.
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`78.
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`In exchange for its services in connection with the Transatlantic Real
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`Estate and 420 Real Estate crowdfunding offerings, TruCrowd received $91,679
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`and $48,412, respectively.
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`79. Petrescu, acting on behalf of TruCrowd, assisted issuers and their
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`affiliated individuals with preparing and filing Forms C and offering statements.
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`80. Petrescu, acting on behalf of TruCrowd, permitted the Transatlantic
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`Real Estate and 420 Real Estate offerings to proceed despite multiple warning
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`signs of possible fraud or other harm to investors.
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`81. Petrescu, acting on behalf of TruCrowd, worked with both Shumake
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`and Birch to file the Transatlantic Real Estate Form C and offering statement.
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`- 20 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.21 Filed 09/20/21 Page 21 of 40
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`
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`82. According to Petrescu, Birch told him that she was the sole officer of
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`Transatlantic Real Estate and that Shumake only provided marketing services.
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`However, Shumake routinely coordinated with Petrescu to address non-marketing
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`matters for the company, such as investor communications and lining up a transfer
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`agent.
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`83. Petrescu did not question why the Transatlantic Real Estate offering
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`statement omitted any mention of Shumake’s involvement with the company and
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`the offering.
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`84.
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`In November 2018, two months after the Transatlantic Real Estate
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`offering opened, Birch forwarded an email to Petrescu from an individual who had
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`provided marketing services to Birch and Shumake in connection with the
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`Transatlantic Real Estate offering.
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`85. This individual’s email to Birch and Shumake complained that they
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`owed him money for services he had performed on the offering, stated that he had
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`referred Transatlantic Real Estate for collections, and warned them of the potential
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`impact of “SEC, Bad Actor Check.”
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`86. These emails required action by Petrescu, and through him, by
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`TruCrowd. Regulation Crowdfunding [17 C.F.R. §§227.301(c)] requires funding
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`portals and their associated persons to conduct a background and securities
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`enforcement regulatory history check (commonly referred to as a “bad actor”
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`- 21 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.22 Filed 09/20/21 Page 22 of 40
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`
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`check) on each issuer and the issuer’s officers and directors (and any persons
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`performing a similar function) to determine if they are subject to disqualification
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`from participating in crowdfunding under Rule 503 of Regulation Crowdfunding,
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`and to remove an offering from their platform if they become aware of information
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`after they have granted access that causes them to reasonably believe that the issuer
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`or the offering presents the potential for fraud or otherwise raises concerns about
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`investor protection.
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`87. Even after receiving this email, Petrescu never requested a bad actor
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`check or ran a background check on Shumake. If Petrescu had done so, he would
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`have learned of Shumake’s criminal history.
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`88. A short time later, in December 2018, while the Transatlantic Real
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`Estate offering was still raising funds from investors, Petrescu referred Birch and
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`Shumake to an experienced securities attorney, to explore the possibility of a
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`Regulation A offering for Bangi.
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`89. The securities attorney emailed Petrescu on December 14, 2018, after
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`meeting with Shumake and Birch:
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`- 22 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.23 Filed 09/20/21 Page 23 of 40
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`90. The email linked to a 2017 news article, which discussed the criminal
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`charges filed by the Michigan Attorney General against Shumake and his business
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`Mortgage Auditors of America. A few hours later, Petrescu replied:
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`91. The 2017 news article read, in part, as follows:
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`- 23 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.24 Filed 09/20/21 Page 24 of 40
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`
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`a. “[Michigan Attorney General] Schuette says Shumake was behind
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`a scheme to cheat people who were trying to save their homes from
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`Foreclosure.”
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`b. “The attorney general’s office investigated and recommended a
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`warrant for Shumake’s arrest in 2015, but Robert Shumake was in
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`Africa.”
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`c. “After filing for personal bankruptcy to the tune of more than $3
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`million, Shumake was busy posting on Facebook about his African
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`humanitarian work and even turned up on the Tanzanian TV news
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`as an American investor who ran a railroad.”
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`d. “[L]ast year he was caught in California with $121,000 cash in his
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`trunk and large sums of marijuana. He’s got an active arrest
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`warrant in that case.”
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`92. Despite admitting that he needed “to search some more,” Petrescu did
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`not follow up on this red flag. Instead, Petrescu allowed the Transatlantic Real
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`Estate offering to continue on TruCrowd’s platform.
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`93. Then, in or about April 2019, Petrescu agreed to work with Shumake
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`again and to host the 420 Real Estate offering on TruCrowd’s portal.
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`- 24 -
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`Case 2:21-cv-12193-AJT-APP ECF No. 1, PageID.25 Filed 09/20/21 Page 25 of
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