SEC v. William C. Skelley; and Sohin S. Shah, No. 1:18-cv-8803, Southern District of New York (Apr. 7, 2021) — Complaint

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Doressia L. Hutton
John E. Birkenheier
Ruta G. Dudenas
Attorneys for Plaintiff the UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
175 West Jackson Boulevard, Suite 1450
Chicago, IL 60604-2615
(312) 353-7390
(312) 353-7398 (fax)
Email:[email protected]

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

_________________________________________
        :
UNITED STATES SECURITIES    :
AND EXCHANGE COMMISSION,  : Case No. 1:18-cv-8803
       :
  Plaintiff,    : Judge:
       :
v.   :
   :
WILLIAM C. SKELLEY     : COMPLAINT
       :
 and      : JURY TRIAL
       : DEMANDED
SOHIN S. SHAH,     :
       :
  Defendants.       :
:
__________________________________________  :

Plaintiff, the United States Securities and Exchange Commission (the “SEC”), for its
complaint against Defendants William C. Skelley (“Skelley”) and Sohin S. Shah (“Shah”)
(collectively, “Defendants”) alleges as follows:

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Nature Of The Case
1. This case arises from Skelley and Shah engaging in a fraudulent scheme to
misappropriate more than $1.17 million from investors. Between October 2013 and November
2016, $3.39 million dollars was raised from 42 investors in at least 17 states.  The investors were
investing in Innovational Funding, LLC (“iFunding”).  Skelley and iFunding made materially false
statements and omitted material facts as they told investors through private placement memoranda
and verbally that their funds would be used for the business operations of iFunding.  Contrary to
these representations, Skelley and Shah used a significant portion of the investor funds to pay for
personal rent, trips, food, beverages, and entertainment and to make cash withdrawals.
2. Moreover, Skelley and Shah controlled iFunding as its only officers and directors.
Skelley and Shah are therefore responsible for iFunding’s violations.
3. By engaging in the conduct alleged in this Complaint, William C. Skelley violated
Sections 17(a)(1),(2), and (3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)],
Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and
Rule 10b-5 thereunder [17 C.F.R. 240.10b-5], and is liable as a control person of iFunding under
Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for iFunding’s violations of Section 10(b)
of the Exchange Act and Rule 10b-5 thereunder.  By engaging in the conduct alleged in this
Complaint, Sohin S. Shah violated Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §
77q(a)(1) and (3)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5(a) and
(c) thereunder [17 C.F.R. 240.10b-5(a) and (c)], and is liable as a control person of iFunding under
Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for iFunding’s violations of Section 10(b)
of the Exchange Act and Rule 10b-5 thereunder.

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Jurisdiction And Venue
4. The SEC brings this action pursuant to Section 20(b) of the Securities Act [15
U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].  This Court has
jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v] and
Section 27(a) of the Exchange Act [15 U.S.C. § 78aa].
5. Venue is proper in the Southern District of New York pursuant to Section 22(a) of
the Securities Act [15 U.S.C. § 77v] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa]
because Defendant Skelley resides in this District and the acts, practices, and courses of business
constituting the violations alleged in this Complaint have occurred within this District and
elsewhere.
Defendants
6. William C. Skelley.  In 2012, Skelley co-founded iFunding with Shah.  Skelley was
Chief Executive Officer of iFunding from June 2012 to October 2016 and Chairman of the Board of
Directors from November 2014 to October 2016.  Skelley is  43 and resides in New York, New
York.
7. Sohin S. Shah.  In 2012, Shah co-founded iFunding with Skelley. Shah was Chief
Operating Officer of iFunding from June 2012 to August 2015 and a Director from November
2014 to on or about August 19, 2015.  From January through September 2014, Shah held a series
82 securities license and was associated with a broker-dealer.  Shah is 31 and resides in Jersey
City, New Jersey.

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Related Entities
8. Innovational Funding, LLC.  Innovational Funding, LLC (“iFunding”) was
formed in July 2012 as a Delaware limited liability company.  iFunding ceased conducting business
in October 2017.   iFunding’s principal place of business was in New York, New York.  It owned
and operated a real estate crowdfunding portal that solicited investors to invest in real estate
projects.
9. Innovational Funding Holdings, Inc.  Innovational Funding Holdings, Inc.
(“iFunding Holdings”) was formed in September 2015 as a Delaware corporation.  Through a
merger in September 2015, iFunding Holdings became the parent of iFunding.  All membership
interests in iFunding were converted into shares of common stock in iFunding Holdings.  In April
2018, iFunding Holdings was dissolved.  iFunding Holdings’ principal place of business was in
New York, New York.
FACTS
I. Background
10. In 2012, Skelley and Shah started iFunding.  Skelley served as the Chief Executive
Officer (“CEO”) of iFunding.  Shah served as the Chief Operating Officer (“COO”).  Throughout
iFunding’s operations, Skelley and Shah were the only officers.
11. In October 2013, iFunding launched its online real estate crowdfunding portal.  In
private placement memoranda (“PPM”) sent to investors in iFunding, iFunding stated that its portal
provided “investors with the opportunity to become equity or debt holders in real estate projects
across the United States.  Through the use of the iFunding’s (sic) website or mobile application,
investors can learn about real estate crowdfunding, browse and evaluate ongoing real estate
investment opportunities, sign associated legal documents, initiate funds transfers, receive updates

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on their investments, and have principal and interest payments or profits earned returned to their
accounts.”  (The investments in the real estate projects are not at issue in this Complaint.)  Investors
in iFunding were required to be accredited investors.
12. Beginning in November 2014, Skelley served as Chairman of the Board of Directors
of iFunding, and Shah served as a director.  Throughout iFunding’s operations, Skelley and Shah
were the only directors.
13. Skelley and Shah controlled the management and day-to-day operations of iFunding,
including iFunding’s bank accounts.  Skelley and Shah had signature authority over the bank
accounts and had debit cards that were linked to iFunding’s bank accounts.
14. Skelley and Shah held the majority of voting securities in iFunding.
II. The Offerings
15. From at least October 2013 through June 2016, iFunding raised money to support
and expand its business operations.  iFunding did this by offering and selling securities in the form
of units of membership interests (“Equity Offerings”) in iFunding to accredited investors.   Also,
iFunding Holdings issued promissory notes convertible to equity (“Debt Offerings”) to accredited
investors.  The investor funds were deposited into iFunding’s bank accounts.
16. From at least October 2013 through June 2016, iFunding raised $3.39 million from
42 investors in 17 states.
17. Between October 2013 and October 2014, iFunding had Equity Offerings for which
there were no PPMs.  For these offerings, Skelley verbally represented to investors by telephone
that their funds would be used to support and expand the business operations of iFunding.
Contrary to these representations, Skelley and Shah used significant portions of the investor funds
to pay for personal expenses including dry cleaning and massages and to make cash withdrawals.

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Skelley and Shah made cash withdrawals and spent the misappropriated funds at businesses in
multiple states including New York, New York.
18.  Between December 2014 and April 2015, several of the offerings were conducted
by means of PPMs.  Through the PPMs, iFunding and Skelley told investors that their funds would
be used to support and expand the business operations of iFunding.  Skelley also verbally
represented to investors that their funds would be used to support and expand the business
operations of iFunding.  Contrary to these representations, Skelley and Shah used significant
portions of the investor funds to pay for personal expenses including personal utilities such as
cable and telephone.
19. Skelley and iFunding had final authority over the content of the PPMs.
20. In December 2015 and June 2016, iFunding conducted two (2) Debt Offerings.
A. The December 2014 PPM
21. iFunding conducted the December 2014 Offering by means of a PPM dated
December 1, 2014 (“December 2014 PPM”).  The December 2014 PPM stated that iFunding
intended to raise up to $2,000,000.
22. The December 2014 PPM stated that “iFunding owns and operates a real estate
crowdfunding portal that provides investors with the opportunity to become equity or debt holders
in real estate projects across the United States.”
23. The December 2014 PPM also stated that investors who wanted additional
information should contact Sohin Shah or William Skelley and listed their phone numbers and
email addresses.
24. The December 2014 PPM additionally stated “[t]oday, the success of the Company
depends on two individuals: William Skelley and Sohin Shah. . . . Further, as the co-founders of the

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Company, Mr. Skelley and Mr. Shah will together control virtually all decisions regarding the
management and control of the Company.”
25. Under Description of the Security, the December 2014 PPM stated that the
“Security Type” is “Membership Interest/LLC Units.”
26. In the “Use of Proceeds” section, the December 2014 PPM stated iFunding “plans
to use the proceeds to support and expand its business operations.  Specifically, the Company will
use this investment to meet the cash flow requirements relating to enhanced sales and underwriting
efforts; improve upon and innovating within its information technology practices; and boost its
marketing efforts.”
27. The “Use of Proceeds” section also stated:
“1.  Sales:  . . . iFunding intends to drastically expand its salesforce to improve customer
relations and meet the rapidly expanding volume and quality of deals that we bring to the
investors on our platform.”
“2.  Underwriting: Underwriting is paramount to our business.  iFunding already utilizes
premium third party services to verify the credibility of potential operating partners . .
..[iFunding], moreover, performs extensive research on the track record of the operating
partners and ensures they have delivered solid returns in that specific asset class.  iFunding
intends to mature its underwriting processes by hiring additional experienced underwriting
personnel and systematizing the underwriting process.  We have recently hired a new
underwriter and will continue to add to the team in the coming year.”
“3.  Technology: iFunding plans to hire employees and contractors to deploy investor
behavioral assessment techniques, big data analytics, machine learning and other
technologies.  An in-house programming team would be established to accelerate the

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onboarding of new features and technical collaborations with other service providers. . . .
The next steps are to convert these analytics using advanced visualization tools into
information that can be used for making decisions that benefit the company.”
“4. Marketing: To fully express the iFunding brand and reinforce the Company’s perceived
market leadership, several strategies will be deployed:
(i) The company will strive to be prominently placed in the press, including
business and real estate online publications or social media presence, financial
TV and potentially radio, explaining the trend toward real estate crowdfunding.
(ii)  Partnerships with real estate businesses, including private equity/real estate
investing institutions, investor training organizations and brokerages, will both
create ‘reach’ to new audiences and reinforce the reliability of our business
model.
(iii) An ongoing presence in situations suitable to the audience – e.g., real estate
industry speaking events, Google search rankings, and banner ads where the
Company’s prospects read their finance and real estate news.”
28. The December 2014 PPM did not state that the investor funds would be used for
any other purposes.
29. Skelley and iFunding had final authority over the content of the December 2014
PPM.
30. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement
thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each
Subscription Agreement stated that the offering was made pursuant to the corresponding PPM.

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31. In connection with the December 2014 Offering, Skelley made similar verbal
representations to potential investors including that the funds would be used to hire more people.
32. The December 2014 PPM stated “iFunding has successfully financed over Twenty-
Five (25) real estate projects listed on its website, totaling tens of millions of dollars in funds
raised.”
B. The January 2015 PPM
33. A PPM dated January 31, 2015 (“January 2015 PPM”) contained a Use of Proceeds
section that was identical to the Use of Proceeds Section in the December 2014 PPM.  The January
2015 PPM did not state that the investor funds would be used for any other purposes.
34. The January 2015 PPM also stated “iFunding has successfully financed over
Twenty-Five (25) real estate projects listed on its website, totaling tens of millions of dollars in
funds raised.”
35. Skelley and iFunding had final authority over the content of the January 2015 PPM.
36. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement
thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each
Subscription Agreement stated that the offering was made pursuant to the corresponding PPM.
37. A PowerPoint deck that was provided to investors included a slide entitled “Use of
Funds” that listed specific dollar amounts to be applied to various iFunding business operations.

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38. The listed iFunding expenses included (i) Digital Marketing, Advertising and
Branding, (ii) Technology Innovation, (iii) Regulatory Filings, Legal & Compliance, and (iv)
Salaries.
C. The April 2015 PPM

39. iFunding conducted an April 2015 Offering by means of a PPM dated April 16,
2015 (“April 2015 PPM”).  The April 2015 PPM stated that iFunding intended to raise up to
$1,000,000.
40. The April 2015 PPM stated that “iFunding owns and operates a real estate
crowdfunding portal that provides investors with the opportunity to become equity or debt holders
in real estate projects across the United States.”

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41. The April 2015 PPM stated that investors who want additional information should
contact Sohin Shah or William Skelley and listed their phone numbers and email addresses.
42. The April 2015 PPM stated “[t]oday, the success of the Company depends on two
individuals: William Skelley and Sohin Shah. . . . Further, as the co-founders of the Company, Mr.
Skelley and Mr. Shah will together control virtually all decisions regarding the management and
control of the Company.”
43. Under Description of the Security, the April 2015 PPM stated that the “Security
Type” is “Membership Interest/LLC Units.”
44. In the “Use of Proceeds” section, the April 2015 PPM stated iFunding “plans to use
the proceeds to support and expand its business operations and for other general corporate
purposes.  Specifically, the Company will use this investment to meet the cash flow requirements
relating to enhanced sales and underwriting efforts; improve upon and innovating within its
information technology practices; and boost its marketing efforts.”
45. The “Use of Proceeds” section also stated:
“1.  Sales:  . . . iFunding intends to drastically expand its salesforce to improve customer
relations and meet the rapidly expanding volume and quality of deals that we bring to the
investors on our platform.”
“2.  Underwriting: Underwriting is paramount to our business.  iFunding already utilizes
premium third party services to verify the credibility of potential operating partners . .
..[iFunding], moreover, performs extensive research on the track record of the operating
partners and ensures they have delivered solid returns in that specific asset class.  iFunding
intends to mature its underwriting processes by hiring additional experienced underwriting

12

personnel and systematizing the underwriting process.  We have recently hired a new
underwriter and will continue to add to the team in the upcoming year.”
 “3.  Technology: iFunding plans to hire employees and contractors to deploy investor
behavioral assessment techniques, big data analytics, machine learning and other
technologies.  An in-house programming team would be established to accelerate the
onboarding of new features and technical collaborations with other service providers.. . .
The next steps are to convert these analytics using advanced visualization tools into
information that can be used for making decisions that benefit the company.”
“4. Marketing: To fully express the iFunding brand and reinforce the Company’s perceived
market leadership, several strategies will be deployed:
(i) The company will strive to be prominently placed in the press, including
business and real estate online publications or social media presence, financial
TV and potentially radio, explaining the trend toward real estate crowdfunding.
(ii)  Partnerships with real estate businesses, including private equity/real estate
investing institutions, investor training organizations and brokerages, will both
create ‘reach’ to new audiences and reinforce the reliability of our business
model.
(iii) An ongoing presence in situations suitable to the audience – e.g., real estate
industry speaking events, Google search rankings, and banner ads where the
Company’s prospects read their finance and real estate news.”
46. The April 2015 PPM stated “iFunding has successfully financed over Thirty-Five
(35) real estate projects listed on its website, totaling tens of millions of dollars in funds raised.”
47. Skelley and iFunding had final authority over the content of the April 2015 PPM.

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48. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement
thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each
Subscription Agreement stated that the offering was made pursuant to the corresponding PPM.
D. Other Equity Offerings Between October 2013 and October 2014
49.  The April 2015 PPM stated that iFunding also conducted other offerings of
securities:
DATE OF
OFFERING
MONEY
RAISED
USE OF PROCEEDS SECURITY TYPE
Oct. 4, 2013

$150,000 Operating Capital Common, Non-Voting
Dec. 24, 2013

$100,000 Operating Capital Common, Non-Voting
July 10, 2014

$125,000 Operating Capital Common, Non-Voting
July 10, 2014

$100,000 Operating Capital Common, Non-Voting
Ending Oct. 6,
2014

$125,000 Operating Capital Common, Non-Voting
Oct. 20, 2014

$80,002.50 Operating Capital Common, Non-Voting

50. For these offerings, Skelley made verbal representations to potential investors.
Skelley told the investors that their funds would be used for iFunding’s operations including
growing the business, developing technology, hiring people, and salaries.
51. Skelley provided at least one investor with a written business plan.
52. Skelley did not tell the investors that their funds would be used to pay for personal
expenses for Skelley and Shah such as personal travel, retail store purchases, and personal meals.
E. The December 2015 Debt Offering and June 2016 Debt Offerings
53. In December 2015 and June 2016, iFunding Holdings issued to five investors
promissory notes convertible to capital or common stock.  Each note stated that it was a security.

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54. Each of the five notes was executed by Skelley on behalf of iFunding Holdings.
The December 2015 notes were issued in the principal amount of $187,500 and a 2% rate of return
with the potential for the interest to increase to 6% under certain circumstances.  The June 2016
note was issued in the principal amount of $250,000 and had a 10% rate of return.
III. Skelley and Shah Misappropriated Over $1.17 Million of Investor Funds
55. Skelley and Shah engaged in a fraudulent scheme to misappropriate investor funds.
They were supposed to use the investor funds for iFunding’s business operations.  Instead, Skelley
and Shah used the funds to pay for personal items and services.
56. Funds received from the investors in iFunding were deposited into iFunding’s bank
accounts.  From October 3, 2013 to May 6, 2015, the investor funds were deposited into TD Bank
Account # XXX-5674, and on or about December 30, 2015 and June 23, 2016, the investor funds
were deposited into TD Bank Account # XXX-6594 (collectively, “iFunding bank accounts”).
57.   Skelley and Shah had signature authority over iFunding’s bank accounts.  Skelley
and Shah had debit cards linked to iFunding’s bank accounts.
58. From at least October 2013 to November 30, 2016, Skelley and Shah
misappropriated investor funds.  Skelley and Shah used the debit cards to make numerous
purchases for personal items and services.  These personal items and services included rent, food,
beverages, trips, entertainment, dry cleaning, massages, and withdrawals of cash.  None of these
purchases or cash withdrawals were for iFunding’s business operations.  Skelley’s and Shah’s
purchases and cash withdrawals were far in excess of any salary or deferred compensation owed to
Skelley and Shah.
59. Skelley reviewed bank statements monthly so he knew how the funds were being
used.

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60. iFunding’s accountant advised Skelley and Shah to stop using the funds to pay for
personal expenses.
61. Skelley and Shah knowingly or recklessly used investor funds to pay for their
personal expenses.
62. Between October 2013 and November 2016, Skelley used at least $1,073,746.65 of
investor funds for personal items and services.
63. Between October 2013 and August 2016, Shah used at least $103,342.27 of
investor funds for personal items and services.
IV. iFunding And Skelley Misrepresented How Investor Funds Would Be Used
64. From at least October 2013 through June 2016, iFunding and Skelley made material
misrepresentations in the offer or sale of securities to investors.   The December 2014 PPM,
January 2015 PPM, and April 2015 PPM represented to investors that their funds would be used
for iFunding’s business operations.  Contrary to the representations in the PPMs, investor funds
were used for more than iFunding’s business operations.  Skelley and Shah misappropriated
investor funds for personal use including personal rent, travel, dry cleaning, massages, meals, and
cash withdrawals.  None of the amounts spent by Skelley and Shah on personal items and services
were for iFunding’s business operations.
65. From at least October 2013 through June 2016, in the offer or sale of securities,
iFunding and Skelley omitted material facts which made the representations misleading. The PPMs
do not state that since May 28, 2013, investor funds were being misappropriated by Skelley and
Shah for their personal use.
66. The statements in the PPMs are directly attributable to Skelley and iFunding.
Skelley was iFunding’s CEO and Chairman of the Board of Directors.

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67. From at least October 2013 through June 2016, in the offer or sale of securities,
Skelley verbally made material misrepresentations and omitted material facts which made the
representations misleading.  For the offerings that did not have written PPMs and to some investors
who were given PPMs, Skelley verbally represented to investors that their funds would be used for
iFunding’s business operations.  Contrary to Skelley’s representations, investor funds were used
for more than iFunding’s business operations.  Skelley and Shah misappropriated investor funds
for their personal use including personal rent, travel, dry cleaning, massages, personal meals, and
cash withdrawals.
68. The misrepresentations and omissions were material because they concern the use
of investor funds.
69. iFunding and Skelley, knew, or were reckless in not knowing, that the investor
funds were supposed to be used for iFunding’s business operations not for Skelley’s and Shah’s
personal expenses.
V. iFunding And Skelley Misrepresented The Success of iFunding’s Crowdfunding
Portal

70. The December 2014 PPM falsely stated “iFunding has successfully financed over
Twenty-Five (25) real estate projects listed on its website, totaling tens of millions of dollars in
funds raised.”  In fact, as of December 1, 2014, iFunding had successfully financed only twenty-
three real estate projects totaling $5.1 million.
71. The April 2015 PPM falsely stated “iFunding has successfully financed over
Thirty-Five (35) real estate projects listed on its website, totaling tens of millions of dollars in
funds raised.”   In fact, as of April 16, 2015, iFunding had successfully financed only thirty-three
real estate projects totaling $8.3 million.

17

72. The misrepresentations were material because investors would have wanted to
know that iFunding’s crowdfunding portal was not as successful as iFunding and Skelley were
representing it to be.
73. iFunding and Skelley, knew, or were reckless in not knowing, how many real estate
projects had been successfully financed and how much money had been raised for the real estate
projects.
VI. Skelley and Shah Controlled iFunding
74. Throughout iFunding’s operations, Skelley was the CEO and Shah was COO.
They were the only officers of iFunding.
75. Beginning in November 2014, Skelley served as Chairman of the Board of Directors
of iFunding, and Shah served as a director.  Throughout iFunding’s operations, Skelley and Shah
were the only directors.
76. Skelley and Shah controlled the management and day-to-day operations of iFunding,
including iFunding’s bank accounts.  Skelley and Shah had signature authority over the bank
accounts and had debit cards that were linked to iFunding’s bank accounts.
77. Skelley and Shah held the majority of voting securities in iFunding.
78. The PPMs stated that as the co-founders of iFunding, Skelley and Shah “will
together control virtually all decisions regarding the management and control of the Company.”
79. Skelley signed the subscription agreements and notes for the offerings.
80. Shah controlled the crowdfunding portal used for the December 2014 Offering.
81. Skelley and Shah knew they were spending investor funds for personal items and
services which uses were contrary to the representations made to investors that their funds would
be used for iFunding’s business operations.

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FIRST CLAIM FOR RELIEF
Violations of Section 17(a)(1) of the Securities Act
(Against Defendants Skelley and Shah)

82. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein.
83. By engaging in the conduct described above, Defendants Skelley and Shah, in the
offer or sale of securities, by the use of the means and instruments of transportation or
communication in interstate commerce or by use of the mails, directly or indirectly, employed
devices, schemes, or artifices to defraud.
84. Defendants Skelley and Shah acted with scienter in that each knowingly or
recklessly engaged in the fraudulent conduct described above.
85. By reason of the foregoing, Defendants Skelley and Shah violated Section 17(a)(1)
of the Securities Act [15 U.S.C. § 77q(a)(1)].
SECOND CLAIM FOR RELIEF
Violations of Sections 17(a)(2) of the Securities Act
(Against Defendant Skelley)

86. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein.
87. By engaging in the conduct described above, Defendant Skelley, in the offer or sale
of securities, by the use of the means and instruments of transportation or communication in
interstate commerce or by use of the mails, directly or indirectly, has obtained money or property
by means of any untrue statement of a material fact or any omission to state a material fact
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading.

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88. By reason of the foregoing, Defendant Skelley violated Sections 17(a)(2) of the
Securities Act [15 U.S.C. § 77q(a)(2)].
THIRD CLAIM FOR RELIEF
Violations of Section 17(a)(3) of the Securities Act
(Against Defendants Skelley and Shah)

89. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein.
90. By engaging in the conduct described above, Defendants Skelley and Shah, in the
offer or sale of securities, by the use of the means and instruments of transportation or
communication in interstate commerce or by use of the mails, directly or indirectly, have engaged
in transactions, practices, or courses of business which operated or would operate as a fraud or
deceit upon the purchasers of such securities.
91. By reason of the foregoing, Defendants Skelley and Shah violated Section 17(a)(3)
of the Securities Act [15 U.S.C. § 77q(a)(3)].
FOURTH CLAIM FOR RELIEF
Violations of 10(b) of the Exchange Act
and Exchange Act Rule 10b-5(a) and (c)
(Against Defendants Skelley and Shah)

92. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein.
93. By engaging in the conduct described above, Defendants Skelley and Shah, in
connection with the purchase or sale of securities, by the use of any means or instrumentalities of
interstate commerce or by the use of the mails, or any national securities exchange, directly and
indirectly: (a) used or employed devices, schemes, or artifices to defraud or (c) engaged in acts,
practices, or courses of business which operated or would have operated as a fraud or deceit upon

20

sellers and purchasers and prospective purchasers of securities.
94. Defendants Skelley and Shah acted with scienter in that each knowingly or
recklessly engaged in the fraudulent conduct described above.
95. By reason of the foregoing, Defendants Skelley and Shah violated Section 10(b) of
the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(a) and (c) thereunder [17 C.F.R. 240.10b-
5(a) and (c)].
FIFTH CLAIM FOR RELIEF
Violations of 10(b) of the Exchange Act
and Exchange Act Rule 10b-5(b)
(Against Defendant Skelley)

96. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein
97. By engaging in the conduct described above, Defendant Skelley, in connection with
the purchase or sale of securities, by the use of any means or instrumentalities of interstate
commerce or by the use of the mails, or any national securities exchange, directly and indirectly:
(b) made untrue statements of material fact or omitted to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they were made, not
misleading.
98.  Defendant Skelley acted with scienter in that he knowingly or recklessly engaged
in the fraudulent conduct described above.
99. By reason of the foregoing, Defendant Skelley violated Section 10(b) of the
Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. 240.10b-5(b)].

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SIXTH CLAIM FOR RELIEF
Control Person Liability for
Violations of 10(b) of the Exchange Act
and Exchange Act Rule 10b-5
(Against Defendants Skelley and Shah)

100. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though
fully set forth herein
101. By engaging in the conduct described above, iFunding in connection with the
purchase or sale of securities, by the use of any means or instrumentalities of interstate commerce
or by the use of the mails, or any national securities exchange, directly and indirectly: (a) used or
employed devices, schemes, or artifices to defraud; (b) made untrue statements of material fact or
omitted to state a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; or (c) engaged in acts, practices, or
courses of business which operated or would have operated as a fraud or deceit upon sellers and
purchasers and prospective purchasers of securities.
102. iFunding acted with scienter in that it knowingly or recklessly engaged in the
fraudulent conduct described above.
103. As described above, iFunding violated Section 10(b) of the Exchange Act [15
U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5].
104. At all times relevant hereto, Defendants Skelley and Shah were controlling
persons of iFunding for the purposes of Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)].
105. Through their positions as Chief Executive Officer, Chief Operating Officer, and
directors, and by their conduct, Defendants Skelley and Shah exercised general control over the
operations of iFunding.

22

106. Through their positions and by their conduct, Defendants Skelley and Shah
possessed the power or ability to control the offerings, misappropriation, and activities upon
which iFunding’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder are
based, whether or not that power was exercised.
107. By reason of the foregoing, pursuant to Section 20(a) of the Exchange Act [15
U.S.C. § 78t(a)], Defendant Skelley is jointly and severally liable with, and to the same extent as,
iFunding for its violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
108. By reason of the foregoing, pursuant to Section 20(a) of the Exchange Act [15
U.S.C. § 78t(a)], Defendant Shah is jointly and severally liable with, and to the same extent as,
iFunding for its violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
RELIEF REQUESTED
 WHEREFORE, the SEC respectfully requests that this Court:
I.
 Issue findings of fact and conclusions of law that Defendants Skelley and Shah
committed the violations charged and alleged herein.
II.
 Enter an Order of Permanent Injunction restraining and enjoining Defendants Skelley and
Shah from, directly or indirectly, engaging in the transactions, acts, practices, or courses of
business described above, or in conduct of similar purport and object, in violation of Section
17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C.
§78j(b)], and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5].
III.
 Enter an Order requiring Defendants Skelley and Shah to disgorge all of their ill-gotten

23

gains received as a result of the violations alleged in this Complaint including prejudgment
interest.
IV.
With regard to Defendants Skelley’s and Shah’s violative acts, practices, and courses of
business set forth herein, issue an Order imposing upon Defendants Skelley and Shah appropriate
civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section
21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
V.
 Retain jurisdiction of this action in accordance with the principals of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and
decrees that may be entered or to entertain any suitable application or motion for additional relief
within the jurisdiction of this Court.
VI.
 Grant such other relief as this Court deems appropriate.

Dated: September 26, 2018
      UNITED STATES SECURITIES
       AND EXCHANGE COMMISSION
            By: /s/Doressia L. Hutton
Doressia L. Hutton ([email protected])
  John E. Birkenheier ([email protected])
Ruta G. Dudenas ([email protected])
      175 West Jackson Boulevard, Suite 1450
      Chicago, IL 60604-2615
      (312) 353-7390
      (312) 353-7398 (fax)

Attorneys for Plaintiff the United States Securities
and Exchange Commission

1 
 

Doressia L. Hutton  
John E. Birkenheier  
Ruta G. Dudenas  
Attorneys for Plaintiff the UNITED  
STATES SECURITIES AND EXCHANGE COMMISSION 
175 West Jackson Boulevard, Suite 1450 
Chicago, IL 60604-2615 
(312) 353-7390 
(312) 353-7398 (fax) 
Email:[email protected] 
 

 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
 
_________________________________________ 
        :  
UNITED STATES SECURITIES    :  
AND EXCHANGE COMMISSION,  : Case No. 1:18-cv-8803 
       : 
  Plaintiff,    : Judge: 
       : 

v.   :  
   :  

WILLIAM C. SKELLEY     : COMPLAINT 
       :  
 and      : JURY TRIAL  
       : DEMANDED 
SOHIN S. SHAH,     : 
       : 
  Defendants.    :  

: 
__________________________________________  : 

 

Plaintiff, the United States Securities and Exchange Commission (the “SEC”), for its 

complaint against Defendants William C. Skelley (“Skelley”) and Sohin S. Shah (“Shah”) 

(collectively, “Defendants”) alleges as follows: 

 

 

 

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2 
 

Nature Of The Case 

1. This case arises from Skelley and Shah engaging in a fraudulent scheme to 

misappropriate more than $1.17 million from investors. Between October 2013 and November 

2016, $3.39 million dollars was raised from 42 investors in at least 17 states.  The investors were 

investing in Innovational Funding, LLC (“iFunding”).  Skelley and iFunding made materially false 

statements and omitted material facts as they told investors through private placement memoranda 

and verbally that their funds would be used for the business operations of iFunding.  Contrary to 

these representations, Skelley and Shah used a significant portion of the investor funds to pay for 

personal rent, trips, food, beverages, and entertainment and to make cash withdrawals.   

2. Moreover, Skelley and Shah controlled iFunding as its only officers and directors.  

Skelley and Shah are therefore responsible for iFunding’s violations. 

3. By engaging in the conduct alleged in this Complaint, William C. Skelley violated 

Sections 17(a)(1),(2), and (3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], 

Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and 

Rule 10b-5 thereunder [17 C.F.R. 240.10b-5], and is liable as a control person of iFunding under 

Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for iFunding’s violations of Section 10(b) 

of the Exchange Act and Rule 10b-5 thereunder.  By engaging in the conduct alleged in this 

Complaint, Sohin S. Shah violated Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. § 

77q(a)(1) and (3)], Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5(a) and 

(c) thereunder [17 C.F.R. 240.10b-5(a) and (c)], and is liable as a control person of iFunding under 

Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for iFunding’s violations of Section 10(b) 

of the Exchange Act and Rule 10b-5 thereunder.    

 

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3 
 

Jurisdiction And Venue 

4. The SEC brings this action pursuant to Section 20(b) of the Securities Act [15 

U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].  This Court has 

jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v] and 

Section 27(a) of the Exchange Act [15 U.S.C. § 78aa].  

5. Venue is proper in the Southern District of New York pursuant to Section 22(a) of 

the Securities Act [15 U.S.C. § 77v] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa] 

because Defendant Skelley resides in this District and the acts, practices, and courses of business 

constituting the violations alleged in this Complaint have occurred within this District and 

elsewhere.   

Defendants 

6. William C. Skelley.  In 2012, Skelley co-founded iFunding with Shah.  Skelley was 

Chief Executive Officer of iFunding from June 2012 to October 2016 and Chairman of the Board of 

Directors from November 2014 to October 2016.  Skelley is 43 and resides in New York, New 

York. 

7. Sohin S. Shah.  In 2012, Shah co-founded iFunding with Skelley. Shah was Chief 

Operating Officer of iFunding from June 2012 to August 2015 and a Director from November 

2014 to on or about August 19, 2015.  From January through September 2014, Shah held a series 

82 securities license and was associated with a broker-dealer.  Shah is 31 and resides in Jersey 

City, New Jersey.              

 

 

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Related Entities 

8. Innovational Funding, LLC.  Innovational Funding, LLC (“iFunding”) was 

formed in July 2012 as a Delaware limited liability company.  iFunding ceased conducting business 

in October 2017.   iFunding’s principal place of business was in New York, New York.  It owned 

and operated a real estate crowdfunding portal that solicited investors to invest in real estate 

projects.   

9. Innovational Funding Holdings, Inc.  Innovational Funding Holdings, Inc. 

(“iFunding Holdings”) was formed in September 2015 as a Delaware corporation.  Through a 

merger in September 2015, iFunding Holdings became the parent of iFunding.  All membership 

interests in iFunding were converted into shares of common stock in iFunding Holdings.  In April 

2018, iFunding Holdings was dissolved.  iFunding Holdings’ principal place of business was in 

New York, New York.          

FACTS 

I. Background 

10. In 2012, Skelley and Shah started iFunding.  Skelley served as the Chief Executive 

Officer (“CEO”) of iFunding.  Shah served as the Chief Operating Officer (“COO”).  Throughout 

iFunding’s operations, Skelley and Shah were the only officers.  

11. In October 2013, iFunding launched its online real estate crowdfunding portal.  In 

private placement memoranda (“PPM”) sent to investors in iFunding, iFunding stated that its portal 

provided “investors with the opportunity to become equity or debt holders in real estate projects 

across the United States.  Through the use of the iFunding’s (sic) website or mobile application, 

investors can learn about real estate crowdfunding, browse and evaluate ongoing real estate 

investment opportunities, sign associated legal documents, initiate funds transfers, receive updates 

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on their investments, and have principal and interest payments or profits earned returned to their 

accounts.”  (The investments in the real estate projects are not at issue in this Complaint.)  Investors 

in iFunding were required to be accredited investors.       

12. Beginning in November 2014, Skelley served as Chairman of the Board of Directors 

of iFunding, and Shah served as a director.  Throughout iFunding’s operations, Skelley and Shah 

were the only directors.   

13. Skelley and Shah controlled the management and day-to-day operations of iFunding, 

including iFunding’s bank accounts.  Skelley and Shah had signature authority over the bank 

accounts and had debit cards that were linked to iFunding’s bank accounts. 

14. Skelley and Shah held the majority of voting securities in iFunding. 

II. The Offerings 

15. From at least October 2013 through June 2016, iFunding raised money to support 

and expand its business operations.  iFunding did this by offering and selling securities in the form 

of units of membership interests (“Equity Offerings”) in iFunding to accredited investors.   Also, 

iFunding Holdings issued promissory notes convertible to equity (“Debt Offerings”) to accredited 

investors.  The investor funds were deposited into iFunding’s bank accounts.   

16. From at least October 2013 through June 2016, iFunding raised $3.39 million from 

42 investors in 17 states. 

17. Between October 2013 and October 2014, iFunding had Equity Offerings for which 

there were no PPMs.  For these offerings, Skelley verbally represented to investors by telephone 

that their funds would be used to support and expand the business operations of iFunding.  

Contrary to these representations, Skelley and Shah used significant portions of the investor funds 

to pay for personal expenses including dry cleaning and massages and to make cash withdrawals.  

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Skelley and Shah made cash withdrawals and spent the misappropriated funds at businesses in 

multiple states including New York, New York.   

18.  Between December 2014 and April 2015, several of the offerings were conducted 

by means of PPMs.  Through the PPMs, iFunding and Skelley told investors that their funds would 

be used to support and expand the business operations of iFunding.  Skelley also verbally 

represented to investors that their funds would be used to support and expand the business 

operations of iFunding.  Contrary to these representations, Skelley and Shah used significant 

portions of the investor funds to pay for personal expenses including personal utilities such as 

cable and telephone.   

19. Skelley and iFunding had final authority over the content of the PPMs.   

20. In December 2015 and June 2016, iFunding conducted two (2) Debt Offerings.    

A. The December 2014 PPM 

21. iFunding conducted the December 2014 Offering by means of a PPM dated 

December 1, 2014 (“December 2014 PPM”).  The December 2014 PPM stated that iFunding 

intended to raise up to $2,000,000.   

22. The December 2014 PPM stated that “iFunding owns and operates a real estate 

crowdfunding portal that provides investors with the opportunity to become equity or debt holders 

in real estate projects across the United States.”      

23. The December 2014 PPM also stated that investors who wanted additional 

information should contact Sohin Shah or William Skelley and listed their phone numbers and 

email addresses. 

24. The December 2014 PPM additionally stated “[t]oday, the success of the Company 

depends on two individuals: William Skelley and Sohin Shah. . . . Further, as the co-founders of the 

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7 
 

Company, Mr. Skelley and Mr. Shah will together control virtually all decisions regarding the 

management and control of the Company.” 

25. Under Description of the Security, the December 2014 PPM stated that the 

“Security Type” is “Membership Interest/LLC Units.”   

26. In the “Use of Proceeds” section, the December 2014 PPM stated iFunding “plans 

to use the proceeds to support and expand its business operations.  Specifically, the Company will 

use this investment to meet the cash flow requirements relating to enhanced sales and underwriting 

efforts; improve upon and innovating within its information technology practices; and boost its 

marketing efforts.” 

27. The “Use of Proceeds” section also stated:  

“1.  Sales:  . . . iFunding intends to drastically expand its salesforce to improve customer 

relations and meet the rapidly expanding volume and quality of deals that we bring to the 

investors on our platform.” 

“2.  Underwriting: Underwriting is paramount to our business.  iFunding already utilizes 

premium third party services to verify the credibility of potential operating partners . . 

..[iFunding], moreover, performs extensive research on the track record of the operating 

partners and ensures they have delivered solid returns in that specific asset class.  iFunding 

intends to mature its underwriting processes by hiring additional experienced underwriting 

personnel and systematizing the underwriting process.  We have recently hired a new 

underwriter and will continue to add to the team in the coming year.” 

“3.  Technology: iFunding plans to hire employees and contractors to deploy investor 

behavioral assessment techniques, big data analytics, machine learning and other 

technologies.  An in-house programming team would be established to accelerate the 

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8 
 

onboarding of new features and technical collaborations with other service providers. . . . 

The next steps are to convert these analytics using advanced visualization tools into 

information that can be used for making decisions that benefit the company.” 

“4. Marketing: To fully express the iFunding brand and reinforce the Company’s perceived 

market leadership, several strategies will be deployed: 

(i) The company will strive to be prominently placed in the press, including 

business and real estate online publications or social media presence, financial 

TV and potentially radio, explaining the trend toward real estate crowdfunding. 

(ii)  Partnerships with real estate businesses, including private equity/real estate 

investing institutions, investor training organizations and brokerages, will both 

create ‘reach’ to new audiences and reinforce the reliability of our business 

model. 

(iii) An ongoing presence in situations suitable to the audience – e.g., real estate    

industry speaking events, Google search rankings, and banner ads where the 

Company’s prospects read their finance and real estate news.” 

28. The December 2014 PPM did not state that the investor funds would be used for 

any other purposes. 

29. Skelley and iFunding had final authority over the content of the December 2014 

PPM.   

30. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement 

thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each 

Subscription Agreement stated that the offering was made pursuant to the corresponding PPM. 

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9 
 

31. In connection with the December 2014 Offering, Skelley made similar verbal 

representations to potential investors including that the funds would be used to hire more people. 

32. The December 2014 PPM stated “iFunding has successfully financed over Twenty-

Five (25) real estate projects listed on its website, totaling tens of millions of dollars in funds 

raised.” 

B. The January 2015 PPM   

33. A PPM dated January 31, 2015 (“January 2015 PPM”) contained a Use of Proceeds 

section that was identical to the Use of Proceeds Section in the December 2014 PPM.  The January 

2015 PPM did not state that the investor funds would be used for any other purposes. 

34. The January 2015 PPM also stated “iFunding has successfully financed over 

Twenty-Five (25) real estate projects listed on its website, totaling tens of millions of dollars in 

funds raised.” 

35. Skelley and iFunding had final authority over the content of the January 2015 PPM.   

36. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement 

thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each 

Subscription Agreement stated that the offering was made pursuant to the corresponding PPM. 

37. A PowerPoint deck that was provided to investors included a slide entitled “Use of 

Funds” that listed specific dollar amounts to be applied to various iFunding business operations.   

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10 
 

 

38. The listed iFunding expenses included (i) Digital Marketing, Advertising and 

Branding, (ii) Technology Innovation, (iii) Regulatory Filings, Legal & Compliance, and (iv) 

Salaries.     

C. The April 2015 PPM  
 

39. iFunding conducted an April 2015 Offering by means of a PPM dated April 16, 

2015 (“April 2015 PPM”).  The April 2015 PPM stated that iFunding intended to raise up to 

$1,000,000. 

40. The April 2015 PPM stated that “iFunding owns and operates a real estate 

crowdfunding portal that provides investors with the opportunity to become equity or debt holders 

in real estate projects across the United States.”      

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11 
 

41. The April 2015 PPM stated that investors who want additional information should 

contact Sohin Shah or William Skelley and listed their phone numbers and email addresses. 

42. The April 2015 PPM stated “[t]oday, the success of the Company depends on two 

individuals: William Skelley and Sohin Shah. . . . Further, as the co-founders of the Company, Mr. 

Skelley and Mr. Shah will together control virtually all decisions regarding the management and 

control of the Company.” 

43. Under Description of the Security, the April 2015 PPM stated that the “Security 

Type” is “Membership Interest/LLC Units.”   

44. In the “Use of Proceeds” section, the April 2015 PPM stated iFunding “plans to use 

the proceeds to support and expand its business operations and for other general corporate 

purposes.  Specifically, the Company will use this investment to meet the cash flow requirements 

relating to enhanced sales and underwriting efforts; improve upon and innovating within its 

information technology practices; and boost its marketing efforts.” 

45. The “Use of Proceeds” section also stated:  

“1.  Sales:  . . . iFunding intends to drastically expand its salesforce to improve customer 

relations and meet the rapidly expanding volume and quality of deals that we bring to the 

investors on our platform.” 

“2.  Underwriting: Underwriting is paramount to our business.  iFunding already utilizes 

premium third party services to verify the credibility of potential operating partners . . 

..[iFunding], moreover, performs extensive research on the track record of the operating 

partners and ensures they have delivered solid returns in that specific asset class.  iFunding 

intends to mature its underwriting processes by hiring additional experienced underwriting 

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12 
 

personnel and systematizing the underwriting process.  We have recently hired a new 

underwriter and will continue to add to the team in the upcoming year.” 

 “3.  Technology: iFunding plans to hire employees and contractors to deploy investor 

behavioral assessment techniques, big data analytics, machine learning and other 

technologies.  An in-house programming team would be established to accelerate the 

onboarding of new features and technical collaborations with other service providers.. . . 

The next steps are to convert these analytics using advanced visualization tools into 

information that can be used for making decisions that benefit the company.” 

“4. Marketing: To fully express the iFunding brand and reinforce the Company’s perceived 

market leadership, several strategies will be deployed: 

(i) The company will strive to be prominently placed in the press, including 

business and real estate online publications or social media presence, financial 

TV and potentially radio, explaining the trend toward real estate crowdfunding. 

(ii)  Partnerships with real estate businesses, including private equity/real estate 

investing institutions, investor training organizations and brokerages, will both 

create ‘reach’ to new audiences and reinforce the reliability of our business 

model. 

(iii) An ongoing presence in situations suitable to the audience – e.g., real estate 

industry speaking events, Google search rankings, and banner ads where the 

Company’s prospects read their finance and real estate news.” 

46. The April 2015 PPM stated “iFunding has successfully financed over Thirty-Five 

(35) real estate projects listed on its website, totaling tens of millions of dollars in funds raised.”   

47. Skelley and iFunding had final authority over the content of the April 2015 PPM.   

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13 
 

48. Skelley, as CEO of iFunding, executed each investor’s Subscription Agreement 

thereby agreeing to and accepting the Subscription Agreements on behalf of iFunding.  Each 

Subscription Agreement stated that the offering was made pursuant to the corresponding PPM.     

D. Other Equity Offerings Between October 2013 and October 2014 

49.  The April 2015 PPM stated that iFunding also conducted other offerings of  

securities: 

DATE OF 
OFFERING 

MONEY 
RAISED USE OF PROCEEDS SECURITY TYPE 

Oct. 4, 2013 
 $150,000 Operating Capital Common, Non-Voting 

Dec. 24, 2013 
 $100,000 Operating Capital Common, Non-Voting 

July 10, 2014 
 $125,000 Operating Capital Common, Non-Voting 

July 10, 2014 
 $100,000 Operating Capital Common, Non-Voting 

Ending Oct. 6, 
2014 

 
$125,000 Operating Capital Common, Non-Voting 

Oct. 20, 2014 
 $80,002.50 Operating Capital Common, Non-Voting 

 

50. For these offerings, Skelley made verbal representations to potential investors.  

Skelley told the investors that their funds would be used for iFunding’s operations including 

growing the business, developing technology, hiring people, and salaries. 

51. Skelley provided at least one investor with a written business plan. 

52. Skelley did not tell the investors that their funds would be used to pay for personal 

expenses for Skelley and Shah such as personal travel, retail store purchases, and personal meals. 

E. The December 2015 Debt Offering and June 2016 Debt Offerings  

53. In December 2015 and June 2016, iFunding Holdings issued to five investors 

promissory notes convertible to capital or common stock.  Each note stated that it was a security.   

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14 
 

54. Each of the five notes was executed by Skelley on behalf of iFunding Holdings.   

The December 2015 notes were issued in the principal amount of $187,500 and a 2% rate of return 

with the potential for the interest to increase to 6% under certain circumstances.  The June 2016 

note was issued in the principal amount of $250,000 and had a 10% rate of return. 

III. Skelley and Shah Misappropriated Over $1.17 Million of Investor Funds 

55. Skelley and Shah engaged in a fraudulent scheme to misappropriate investor funds.  

They were supposed to use the investor funds for iFunding’s business operations.  Instead, Skelley 

and Shah used the funds to pay for personal items and services.   

56. Funds received from the investors in iFunding were deposited into iFunding’s bank 

accounts.  From October 3, 2013 to May 6, 2015, the investor funds were deposited into TD Bank 

Account # XXX-5674, and on or about December 30, 2015 and June 23, 2016, the investor funds 

were deposited into TD Bank Account # XXX-6594 (collectively, “iFunding bank accounts”).   

57.   Skelley and Shah had signature authority over iFunding’s bank accounts.  Skelley 

and Shah had debit cards linked to iFunding’s bank accounts.     

58. From at least October 2013 to November 30, 2016, Skelley and Shah 

misappropriated investor funds.  Skelley and Shah used the debit cards to make numerous 

purchases for personal items and services.  These personal items and services included rent, food, 

beverages, trips, entertainment, dry cleaning, massages, and withdrawals of cash.  None of these 

purchases or cash withdrawals were for iFunding’s business operations.  Skelley’s and Shah’s 

purchases and cash withdrawals were far in excess of any salary or deferred compensation owed to 

Skelley and Shah. 

59. Skelley reviewed bank statements monthly so he knew how the funds were being 

used. 

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15 
 

60. iFunding’s accountant advised Skelley and Shah to stop using the funds to pay for 

personal expenses. 

61. Skelley and Shah knowingly or recklessly used investor funds to pay for their 

personal expenses.  

62. Between October 2013 and November 2016, Skelley used at least $1,073,746.65 of 

investor funds for personal items and services. 

63. Between October 2013 and August 2016, Shah used at least $103,342.27 of 

investor funds for personal items and services. 

IV. iFunding And Skelley Misrepresented How Investor Funds Would Be Used 

64. From at least October 2013 through June 2016, iFunding and Skelley made material 

misrepresentations in the offer or sale of securities to investors.   The December 2014 PPM, 

January 2015 PPM, and April 2015 PPM represented to investors that their funds would be used 

for iFunding’s business operations.  Contrary to the representations in the PPMs, investor funds 

were used for more than iFunding’s business operations.  Skelley and Shah misappropriated 

investor funds for personal use including personal rent, travel, dry cleaning, massages, meals, and 

cash withdrawals.  None of the amounts spent by Skelley and Shah on personal items and services 

were for iFunding’s business operations.   

65. From at least October 2013 through June 2016, in the offer or sale of securities, 

iFunding and Skelley omitted material facts which made the representations misleading. The PPMs 

do not state that since May 28, 2013, investor funds were being misappropriated by Skelley and 

Shah for their personal use. 

66. The statements in the PPMs are directly attributable to Skelley and iFunding.  

Skelley was iFunding’s CEO and Chairman of the Board of Directors.     

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67. From at least October 2013 through June 2016, in the offer or sale of securities, 

Skelley verbally made material misrepresentations and omitted material facts which made the 

representations misleading.  For the offerings that did not have written PPMs and to some investors 

who were given PPMs, Skelley verbally represented to investors that their funds would be used for 

iFunding’s business operations.  Contrary to Skelley’s representations, investor funds were used 

for more than iFunding’s business operations.  Skelley and Shah misappropriated investor funds 

for their personal use including personal rent, travel, dry cleaning, massages, personal meals, and 

cash withdrawals. 

68. The misrepresentations and omissions were material because they concern the use 

of investor funds.  

69. iFunding and Skelley, knew, or were reckless in not knowing, that the investor 

funds were supposed to be used for iFunding’s business operations not for Skelley’s and Shah’s 

personal expenses.  

V. iFunding And Skelley Misrepresented The Success of iFunding’s Crowdfunding 
Portal 
 
70. The December 2014 PPM falsely stated “iFunding has successfully financed over 

Twenty-Five (25) real estate projects listed on its website, totaling tens of millions of dollars in 

funds raised.”  In fact, as of December 1, 2014, iFunding had successfully financed only twenty-

three real estate projects totaling $5.1 million. 

71. The April 2015 PPM falsely stated “iFunding has successfully financed over 

Thirty-Five (35) real estate projects listed on its website, totaling tens of millions of dollars in 

funds raised.”   In fact, as of April 16, 2015, iFunding had successfully financed only thirty-three 

real estate projects totaling $8.3 million. 

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72. The misrepresentations were material because investors would have wanted to 

know that iFunding’s crowdfunding portal was not as successful as iFunding and Skelley were 

representing it to be.    

73. iFunding and Skelley, knew, or were reckless in not knowing, how many real estate 

projects had been successfully financed and how much money had been raised for the real estate 

projects. 

VI. Skelley and Shah Controlled iFunding 

74. Throughout iFunding’s operations, Skelley was the CEO and Shah was COO.  

They were the only officers of iFunding.  

75. Beginning in November 2014, Skelley served as Chairman of the Board of Directors 

of iFunding, and Shah served as a director.  Throughout iFunding’s operations, Skelley and Shah 

were the only directors.   

76. Skelley and Shah controlled the management and day-to-day operations of iFunding, 

including iFunding’s bank accounts.  Skelley and Shah had signature authority over the bank 

accounts and had debit cards that were linked to iFunding’s bank accounts. 

77. Skelley and Shah held the majority of voting securities in iFunding. 

78. The PPMs stated that as the co-founders of iFunding, Skelley and Shah “will 

together control virtually all decisions regarding the management and control of the Company.” 

79. Skelley signed the subscription agreements and notes for the offerings. 

80. Shah controlled the crowdfunding portal used for the December 2014 Offering. 

81. Skelley and Shah knew they were spending investor funds for personal items and 

services which uses were contrary to the representations made to investors that their funds would 

be used for iFunding’s business operations. 

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FIRST CLAIM FOR RELIEF 

Violations of Section 17(a)(1) of the Securities Act 
(Against Defendants Skelley and Shah) 

 
82. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein. 

83. By engaging in the conduct described above, Defendants Skelley and Shah, in the 

offer or sale of securities, by the use of the means and instruments of transportation or 

communication in interstate commerce or by use of the mails, directly or indirectly, employed 

devices, schemes, or artifices to defraud. 

84. Defendants Skelley and Shah acted with scienter in that each knowingly or 

recklessly engaged in the fraudulent conduct described above. 

85. By reason of the foregoing, Defendants Skelley and Shah violated Section 17(a)(1) 

of the Securities Act [15 U.S.C. § 77q(a)(1)]. 

SECOND CLAIM FOR RELIEF 

Violations of Sections 17(a)(2) of the Securities Act 
(Against Defendant Skelley) 

 
86. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein. 

87. By engaging in the conduct described above, Defendant Skelley, in the offer or sale 

of securities, by the use of the means and instruments of transportation or communication in 

interstate commerce or by use of the mails, directly or indirectly, has obtained money or property 

by means of any untrue statement of a material fact or any omission to state a material fact 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading.  

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88. By reason of the foregoing, Defendant Skelley violated Sections 17(a)(2) of the 

Securities Act [15 U.S.C. § 77q(a)(2)]. 

THIRD CLAIM FOR RELIEF 

Violations of Section 17(a)(3) of the Securities Act 
(Against Defendants Skelley and Shah) 

 
89. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein. 

90. By engaging in the conduct described above, Defendants Skelley and Shah, in the 

offer or sale of securities, by the use of the means and instruments of transportation or 

communication in interstate commerce or by use of the mails, directly or indirectly, have engaged 

in transactions, practices, or courses of business which operated or would operate as a fraud or 

deceit upon the purchasers of such securities.  

91. By reason of the foregoing, Defendants Skelley and Shah violated Section 17(a)(3) 

of the Securities Act [15 U.S.C. § 77q(a)(3)]. 

FOURTH CLAIM FOR RELIEF 

Violations of 10(b) of the Exchange Act 
and Exchange Act Rule 10b-5(a) and (c)  
(Against Defendants Skelley and Shah) 

 
92. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein. 

93. By engaging in the conduct described above, Defendants Skelley and Shah, in 

connection with the purchase or sale of securities, by the use of any means or instrumentalities of 

interstate commerce or by the use of the mails, or any national securities exchange, directly and 

indirectly: (a) used or employed devices, schemes, or artifices to defraud or (c) engaged in acts, 

practices, or courses of business which operated or would have operated as a fraud or deceit upon 

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sellers and purchasers and prospective purchasers of securities. 

94. Defendants Skelley and Shah acted with scienter in that each knowingly or 

recklessly engaged in the fraudulent conduct described above. 

95. By reason of the foregoing, Defendants Skelley and Shah violated Section 10(b) of 

the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(a) and (c) thereunder [17 C.F.R. 240.10b-

5(a) and (c)]. 

FIFTH CLAIM FOR RELIEF 

Violations of 10(b) of the Exchange Act 
and Exchange Act Rule 10b-5(b) 

(Against Defendant Skelley) 
 

96. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein 

97. By engaging in the conduct described above, Defendant Skelley, in connection with 

the purchase or sale of securities, by the use of any means or instrumentalities of interstate 

commerce or by the use of the mails, or any national securities exchange, directly and indirectly: 

(b) made untrue statements of material fact or omitted to state a material fact necessary in order to 

make the statements made, in light of the circumstances under which they were made, not 

misleading. 

98.  Defendant Skelley acted with scienter in that he knowingly or recklessly engaged 

in the fraudulent conduct described above. 

99. By reason of the foregoing, Defendant Skelley violated Section 10(b) of the 

Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. 240.10b-5(b)]. 

 

 

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SIXTH CLAIM FOR RELIEF 

Control Person Liability for  
Violations of 10(b) of the Exchange Act 

and Exchange Act Rule 10b-5 
(Against Defendants Skelley and Shah) 

 
100. The SEC realleges and incorporates by reference paragraphs 1 through 81 as though 

fully set forth herein 

101. By engaging in the conduct described above, iFunding in connection with the 

purchase or sale of securities, by the use of any means or instrumentalities of interstate commerce 

or by the use of the mails, or any national securities exchange, directly and indirectly: (a) used or 

employed devices, schemes, or artifices to defraud; (b) made untrue statements of material fact or 

omitted to state a material fact necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; or (c) engaged in acts, practices, or 

courses of business which operated or would have operated as a fraud or deceit upon sellers and 

purchasers and prospective purchasers of securities. 

102. iFunding acted with scienter in that it knowingly or recklessly engaged in the 

fraudulent conduct described above. 

103. As described above, iFunding violated Section 10(b) of the Exchange Act [15 

U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5]. 

104. At all times relevant hereto, Defendants Skelley and Shah were controlling 

persons of iFunding for the purposes of Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)]. 

105. Through their positions as Chief Executive Officer, Chief Operating Officer, and 

directors, and by their conduct, Defendants Skelley and Shah exercised general control over the 

operations of iFunding. 

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106. Through their positions and by their conduct, Defendants Skelley and Shah 

possessed the power or ability to control the offerings, misappropriation, and activities upon 

which iFunding’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder are 

based, whether or not that power was exercised.    

107. By reason of the foregoing, pursuant to Section 20(a) of the Exchange Act [15 

U.S.C. § 78t(a)], Defendant Skelley is jointly and severally liable with, and to the same extent as, 

iFunding for its violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

108. By reason of the foregoing, pursuant to Section 20(a) of the Exchange Act [15 

U.S.C. § 78t(a)], Defendant Shah is jointly and severally liable with, and to the same extent as, 

iFunding for its violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

RELIEF REQUESTED 

 WHEREFORE, the SEC respectfully requests that this Court: 

I.  

 Issue findings of fact and conclusions of law that Defendants Skelley and Shah 

committed the violations charged and alleged herein. 

II.  

 Enter an Order of Permanent Injunction restraining and enjoining Defendants Skelley and 

Shah from, directly or indirectly, engaging in the transactions, acts, practices, or courses of 

business described above, or in conduct of similar purport and object, in violation of Section 

17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. 

§78j(b)], and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5].  

III.  

 Enter an Order requiring Defendants Skelley and Shah to disgorge all of their ill-gotten 

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gains received as a result of the violations alleged in this Complaint including prejudgment 

interest. 

IV. 

With regard to Defendants Skelley’s and Shah’s violative acts, practices, and courses of 

business set forth herein, issue an Order imposing upon Defendants Skelley and Shah appropriate 

civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 

21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]. 

V.  

 Retain jurisdiction of this action in accordance with the principals of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 

decrees that may be entered or to entertain any suitable application or motion for additional relief 

within the jurisdiction of this Court. 

VI. 

 Grant such other relief as this Court deems appropriate. 
 

Dated: September 26, 2018 

      UNITED STATES SECURITIES  
       AND EXCHANGE COMMISSION 

            By: /s/Doressia L. Hutton     
Doressia L. Hutton ([email protected])  

  John E. Birkenheier ([email protected]) 
Ruta G. Dudenas ([email protected]) 

      175 West Jackson Boulevard, Suite 1450 
      Chicago, IL 60604-2615 
      (312) 353-7390 
      (312) 353-7398 (fax) 
 

Attorneys for Plaintiff the United States Securities 
and Exchange Commission 

 

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