The SEC recently filed a lawsuit against Minerco, Inc., and its executives Bobby Shumake Japhia and Julius Makiri Jenge, for orchestrating a pump-and-dump scheme that defrauded investors out of $8 million. Running from October 2019 to May 2021, the scheme involved misleading investors with false claims about Minerco’s activities, including its purported research into psilocybin mushrooms. The defendants inflated stock prices by issuing fraudulent press releases and used offshore accounts to liquidate shares, reaping massive profits while investors suffered significant losses.
The Scheme’s Structure
The fraud had three key stages:
- Acquiring Control: Shumake used personal nominees to secretly gain control of one billion shares of Minerco, then installed Jenge as the CEO. Through shell companies, they effectively took over Minerco without direct public knowledge of their involvement.
- Stock Price Manipulation: They issued numerous press releases with false claims about Minerco’s business ventures, including a partnership with a Jamaican company and a supposed $1 billion valuation, while also promoting celebrity endorsements and a major concert event. These promotions artificially inflated Minerco’s stock price by over 1,269,000%.
- Dumping Shares: Once the stock price was inflated, Shumake and his collaborators sold large quantities of Minerco shares through offshore accounts. These sales, amounting to 928 million shares, generated $8.4 million in gross proceeds, which were then funneled through cryptocurrency exchanges and used for personal gains.
SEC’s Allegations
The SEC has charged the defendants with multiple violations of securities laws, including:
- Fraud in the offer and sale of securities.
- Making false and misleading public statements.
- Manipulating the market to benefit from inflated stock prices.
The defendants now face a series of legal penalties, including disgorgement of profits, civil penalties, and lifetime bans from participating in penny stock offerings or serving as officers of public companies.
Investor Harm
Many investors were lured into purchasing Minerco stock at inflated prices, only to suffer losses when the stock price collapsed. The issuance of one billion additional shares also diluted the value of existing shareholders’ equity, exacerbating investor losses.
This case highlights the ongoing risks of pump-and-dump schemes in microcap stocks, especially where transparency and corporate governance are lacking. The SEC’s crackdown on this fraudulent activity serves as a stark reminder of the importance of investor vigilance and regulatory oversight in protecting market integrity.
You may read the press release and complaint here.
About Michael Rasmussen
Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.
Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include:
- Investment Adviser Compliance Essential for Chief Compliance Officers
- Foundations of Investment Adviser Compliance
- What is a “Security”?
- Investment Adviser Marketing Rule
- Regulation A – Exemption from Registration
- Regulation Crowdfunding – Exemption from Registration
- Regulation D – Exemption from Registration
Michael can also be found on LinkedIn.
Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.