Publicly available records provided by the Securities and Excange Commission on September 26, 2018 report that the SEC has filed charges against William Skelley and Sohin Shah, in connection to allegations that the crowdfunding platform they co-founded, iFunding LLC, misappropriated more than $1 million in investor funds.
In its complaint, the SEC alleges that that Mr. Skelley and Mr. Shah employed “fraudulent claims” when they raised “$3 million from 42 investors in 17 states,” representing that their investors’ funds would be used to create an internet-based crowdfunding platform for real estate equity, when in fact they used more than $1 million of those funds “for their personal use.” The SEC alleges additionally that Mr. Skelley “made materially false and misleading oral statements” to his investors, and that in the process of soliciting investors, both iFunding and Mr. Skelley disseminated private placement memoranda that featured “false statements about the use of funds and misrepresented the number of real estate projects” funded by the company, as well as the sum of the funding raised on it.
With respect to the allegations that Mr. Skelley and Mr. Shah diverted investor funds for their own personal use, the complaint states that such use included “personal rent, trips, food, beverages, and entertainment and to make cash withdrawals.” The complaint goes on to allege that they used investor funds on expenses such as “dry cleaning and massages,” as well as “personal utilities such as cable and telephone.” Per the SEC’s complaint, “none of these purchases or cash withdrawals were for iFunding’s business operations,” and they were “far in excess of any salary or deferred compensation” the defendants were owed.
According to the complaint, William Skelley regularly reviewed the company’s bank statements and was aware of how its funds were being used, and though the company’s accountant advised him and Shah “to stop using the funds to pay for personal expenses,” they continued “knowingly or recklessly” doing so. For instance, the complaint states that in the period beginning October 2013 and ending November 2016, Mr. Skelley “used at least $1,073,746.65 of investor funds for personal items and services,” while Mr. Shah “used at least $103,342.27 of investor funds for personal items and services.” These expenses ran contrary to verbal and written representations that investor funds would be directed to iFunding’s business operations, according to the complaint.
The SEC has charged Mr. Skelley and Mr. Shah with violations of securities laws and rules. It seeks “injunctions, the return of allegedly ill-gotten gains plus interest and civil monetary penalties against both defendants” in the pending complaint.