SEC tells Michigan judge that cannabis crowdfunder can’t escape in bankruptcy

Despite bankruptcy claims and the likelihood of never receiving any money for fines, the Securities and Exchange Commission (SEC) has asked a Michigan judge to allow it to continue its fraud case against Robert Shumake, Jr.

Green Market Report previously reported in 2021 that the SEC had alleged that Shumake, alongside associates Nicole Birch and Willard Jackson, conducted fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies, Transatlantic Real Estate and 420 Real Estate.

The complaint alleged that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, while Shumake and Jackson raised $888,180 through 420 Real Estate. The three individuals then allegedly diverted investor funds for personal use rather than using them for the purposes disclosed to investors.

According to the SEC, 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.

“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,” the SEC stated.

The SEC claims that Shumake, or Bobby Shumake Japhia as he is now called (more on that later), is trying to get out of any payments by “seeking refuge in bankruptcy court.”

The SEC acknowledged in its notice to the court that a Chapter 7 bankruptcy filing could keep it from collecting a monetary judgment if it got one. The SEC argued that the enforcement action is a “police power” that is exempt from the automatic stay provision found in Section 362 of the bankruptcy code.

“Congress created the SEC to protect investors by regulating and overseeing the securities industry,” the agency said. “An important part of the SEC’s mission is the investigation of securities frauds, manipulations, and other violations, and the imposition and enforcement of legal sanctions therefor.”

“Accordingly, the police and regulatory power exception to the automatic stay allows the SEC to continue to litigate the instant action against the Defendant before this Court notwithstanding the Defendant’s bankruptcy filing. As the law makes clear, this enforcement proceeding is not stayed merely because the Defendant filed a petition for bankruptcy,” the SEC continued.

In an odd twist to the case, Shumake decided to legally change his name to Bobby Shumake Japhia in May of 2023 in Georgia.

In October of 2023, the SEC learned of the name change and asked his legal counsel if it could amend the SEC documents to reflect the new name. Japhia’s legal counsel wasn’t informed of the name change and told the SEC it would get back to them.

However, the lawyer never responded to the SEC’s requests. So in December 2023, the SEC asked to just change the name even though Japhia’s counsel hadn’t given its approval. That may be because Japhia hadn’t paid his lawyers.

The lawyers for Japhia have decided to quit working for him because he hasn’t paid his bill. They filed a motion to withdraw on January 29, 2023, with the Eastern District of Michigan Southern Division saying he owed them $36,665.

Jonathan Uretsky, a partner with the law firm PULLP, told the court that he has made numerous attempts to get Japhia to pay his bill, but hasn’t been successful. Uretsky’s court filing calls him Shumake instead of Japhia.

Uretsky claims that Shumake said he would be receiving a large payment of over $50,000 from another legal case in December 2023, but that never happened. PULLP says it has made several attempts to withdraw its representation. Its motion states that the SEC is aware it is dumping its client and that it won’t hurt their enforcement actions.

Shumake/Japhia is the last person in the years-long battle by the SEC to go after the con artists. Birch, Jackson, and the crowdfunding company Fundanna and its CEO Vincent Petrescu have all reached settlements.