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The former head of Ebony magazine, who was ousted last year amid allegations of financial impropriety, is among a group of people charged by the SEC with raising money for marijuana businesses but illegally using the cash for other things — including keeping the magazine afloat.
Willard Jackson, 57, is accused of taking part in a scheme that crowdfunded nearly $2 million for a series of marijuana-related real estate ventures, but whose principals kept the money for themselves, according to civil charges brought by the Securities and Exchange Commission.
An attorney for Jackson had no immediate comment.
At the center of the alleged enterprise was Robert Shumake, 53, who the SEC says kept his name hidden from investors due to criminal convictions for fraud in the past, but actually hatched the scheme and was allegedly instrumental in directing cash away from its intended purposes.
Messages left with attorneys for Shumake weren’t immediately returned.
Jackson was forced out of his role running Ebony in July 2020, after the company’s lenders became concerned about Shumake’s sudden appearance as an investor and allegations of secret ties between the magazine and the marijuna businesses.
Ebony was eventually forced into bankruptcy and sold to former NBA star Junior Bridgeman for $14 million. The media enterprise was relaunched this year with Bridgeman’s daughter, Eden Bridgeman Sklenar, at the helm.
A representative for Ebony didn’t immediately return a message seeking comment.
Founded in 1945 by Chicago businessman John H. Johnson, Ebony sold close to 2.5 million copies a month at its peak in the 1980s, focusing on stories of Black empowerment and success, profiling figures from Sidney Poitier and Diana Ross to Barack and Michelle Obama. But it had fallen into financial straits in recent years and had ceased publishing in print in 2019.
The magazine and its sister-publication, Jet, were acquired by Jackson and a partner in 2016.
According to the SEC, Shumake had allegedly conspired with Jackson and Nicole Birch in making fraudulent crowdfunded securities offerings for two cannabis and hemp companies, Transatlantic Real Estate LLC and 420 Real Estate LLC.
While Shumake was actually in charge of the ventures, the SEC says he hid his involvement from the public out of concern that his 2017 criminal conviction for mortgage fraud would scare off investors. Instead, the crowdfunding efforts purported that Birch and Jackson were in charge.
The SEC said that Shumake and Birch raised $1.020 million from retail investors through Transatlantic Real Estate, and that Shumake and Jackson raised $888,000 through 420 Real Estate.
The three then allegedly used the money for their own purposes rather than invest in the real estate ventures they had promised those who had given them money. Jackson funneled nearly $300,000 of the money into Ebony, the complaint said,
An attorney for Birch could not be immediately reached.
The SEC said it had also charged the crowdfunding platform the three had used, TruCrowd Inc., and its chief executive, Vincent Petrescu, with failing to properly vet the ventures using its services.
“Crowdfunding offerings enable issuers to cast a wide net for potential investors, emphasizing the importance of full and honest disclosure,” said Gurbir S. Grewal, director of the SEC’s division of enforcement. “As companies continue to raise funds through crowdfunding offerings, we will hold issuers, gatekeepers, and individuals accountable and enforce the protections in place for all investors.”
Petrescu and TruCrowd didn’t immediately return a message seeking comment.
The SEC’s complaint, which was filed in federal court in the Eastern District of Michigan, charges Shumake, Birch and Jackson with violating anti-fraud and registration laws and seeks financial penalties and injunctions barring them from serving as corporate officers.
It charges TruCrowd and Petrescu with violating crowdfunding rules and seeks financial penalties against the firm. The SEC said the case marked the first time a crowdfunding platform had been charged for helping support such an alleged fraud.
