The Securities and Exchange Commission (SEC) has filed charges against Minerco Inc. (former over-the-counter ticker: MINE) and two individuals—Bobby Shumake Japhia and Julius Makiri Jenge—in connection with an alleged multimillion-dollar pump-and-dump scheme that defrauded investors out of approximately $8 million. The SEC's complaint alleges that the defendants generated millions of dollars in illicit profits by manipulating the market for Minerco’s stock through deceptive tactics and false promotions.

Allegations of Market Manipulation and Fraud

The SEC’s complaint states that in late 2019, Shumake—who was formerly known as Robert Samuel Shumake, Jr.—secretly acquired control of a significant stock position in Minerco, a dormant penny stock company at the time. In an effort to orchestrate the scheme, Shumake then arranged for Jenge to take over as Minerco’s CEO and control the company’s operations, while Shumake himself remained behind the scenes.

After securing control, the defendants allegedly began promoting Minerco as the “first publicly traded company focused on the research, production, and distribution of psilocybin mushrooms,” a misleading claim designed to draw investor interest by exploiting the growing public fascination with the potential medical benefits of psychedelics. Psilocybin, the active hallucinogenic compound found in “magic mushrooms,” has been the subject of increasing research and media attention for its potential therapeutic effects. The defendants used these market dynamics to artificially inflate Minerco’s stock price through false promotional campaigns.

Mechanics of the Pump-and-Dump Scheme

According to the SEC’s complaint, Shumake and Jenge initiated the pump phase of their scheme by issuing a series of press releases and engaging in promotional activities to create hype around Minerco’s supposed new focus on psilocybin mushrooms. These actions falsely inflated the value of Minerco’s stock and created the illusion of a legitimate business transformation, enticing unwitting investors to purchase shares at artificially elevated prices.

Once Minerco’s stock price had been sufficiently inflated, the defendants began the dump phase of the scheme, offloading large volumes of their shares to the unsuspecting market. As they sold off their stock holdings, the price of Minerco shares plummeted, leaving investors with significant losses while Shumake and Jenge walked away with millions of dollars in ill-gotten gains.

SEC’s Enforcement Action and Broader Implications

The SEC’s enforcement action seeks to hold Minerco, Shumake, and Jenge accountable for their fraudulent conduct. “The defendants manipulated the market and capitalized on the hype surrounding psilocybin research to deceive investors and enrich themselves,” said the SEC’s Director of Enforcement, Gurbir S. Grewal. “This case is a reminder that market manipulation schemes, even those involving emerging industries, will not be tolerated.”

Potential Consequences and Legal Implications

The SEC’s complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains, civil penalties, and penny stock bars against both Shumake and Jenge, prohibiting them from participating in the offering of any penny stocks in the future. If successful, the SEC’s action would also result in a court order barring Minerco from any further violations of federal securities laws.

Key Takeaways for Investors and Market Participants

This case serves as yet another cautionary tale for investors about the risks of speculative investments in penny stocks, particularly those involving companies that attempt to capitalize on trends in emerging industries, such as psilocybin research. Investors should be wary of aggressive promotional campaigns and conduct their own due diligence before investing in low-priced, thinly traded securities.

Next Steps

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, is the latest in a series of actions aimed at combating market manipulation in the microcap space. Market participants are encouraged to review the full SEC Complaint here.

* * *

Attorney Advertising—Anderson P.C. is a U.S. law firm and provides this information as a service to clients, prospective clients, and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.

Anderson P.C. is a boutique law firm dedicated to defending clients in government investigations and securities enforcement actions initiated by the SEC, FINRA, DOJ, and other regulatory bodies. We provide focused, strategic counsel and regulatory guidance across the full spectrum of federal laws and regulations affecting broker-dealers, investment advisers, banks, asset managers, private funds, public companies, senior executives, and digital assets. Our deep expertise allows us to navigate complex legal challenges and deliver results-driven solutions tailored to our clients' unique needs.

If you have any questions or need legal assistance related to government investigations, securities enforcement actions, or regulatory compliance, please don't hesitate to contact us. Our team at Anderson P.C. is here to provide the expert guidance and support you need to navigate these complex challenges.