SEC Charges 'Magic Mushroom' Co. Minerco In $8M Pump-And-Dump Scheme

The Securities and Exchange Commission (SEC) has charged Minerco Inc. MINE and two individuals with orchestrating a multimillion-dollar pump-and-dump scheme. According to the SEC’s complaint, investors were defrauded of approximately $8 million through the false promotion of Minerco as a psilocybin mushroom company.

Minerco Leadership Allegedly Concealed Ownership Links

Between 2019 and 2021, Bobby Shumake, AKA Robert Samuel Shumake Jr., allegedly gained secret control of a large stock position in Minerco, an inactive penny stock company. He arranged for Julius Makiri Jenge to assume control of Minerco to conceal his involvement due to prior negative publicity. The defendants then began promoting Minerco as the “first publicly traded company focused on the research, production, and distribution of psilocybin mushrooms.”

Jenge was arrested in August at Ronald Reagan Washington National Airport while attempting to board a flight to Tanzania. He faces charges of securities fraud related to the scheme and could face up to 20 years in prison if convicted.

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Minerco Valuation and Partnerships Falsely Claimed

The SEC alleges that the defendants issued press releases containing false and misleading information. They falsely claimed an independent third party had valued Minerco at $1 billion and that the company had partnered with a Jamaican firm possessing unique psilocybin strains and cannabis licenses. 

Additionally, Jenge and Minerco allegedly misrepresented the company’s active status in Nevada, despite its charter being revoked.

Shumake is accused of engaging an offshore company to sell his Minerco shares, transferring at least $3.4 million in proceeds to an entity he controlled. “As alleged here, pump-and-dumps often begin when cheap stock of dormant companies is suddenly touted by a promoter as the next big thing,” said Melissa Hodgman, associate director of the SEC’s division of enforcement, in a press release. “Today's action serves as an important reminder that the SEC will remain steadfast in its efforts to root out of the market stock offerings that are more about hype than substance.”

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Controversial Past Surrounds Shumake's Legal Troubles

Shumake made an initial appearance in Detroit federal court after the indictment was unsealed, according to The Detroit News. He faces charges of securities fraud and obstruction, which could lead to up to 20 years in federal prison. Released on a $10,000 unsecured bond, he awaits trial while his attorney declined to comment.

Historically linked to controversial activities, Shumake’s past endeavors have repeatedly skirted the edges of legality. Moreover, his past associations include efforts to secure the early release of former Detroit Mayor Kwame Kilpatrick and allegations of involvement in public corruption related to Detroit’s pension funds. Despite being linked to multiple investigations, Shumake has previously avoided serious legal consequences.

SEC Seeks Injunctions And Financial Penalties

The SEC’s complaint seeks permanent injunctions, disgorgement with prejudgment interest, civil monetary penalties and additional remedies such as conduct-based injunctions and penny stock and officer-and-director bars against Shumake and Jenge. The investigation is ongoing, with the SEC appreciating assistance from multiple international regulatory bodies.

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