A Colorado grand jury indicted Mack Jamie Sprouse, a resident of Jefferson County, on 11 counts of securities fraud. In response to this, Sprouse was arrested by Colorado authorities on June 3, 2025.
The state securities fraud indictment alleged that Sprouse solicited approximately $4.8 million from at least 80 investors in his house-flipping business, Urban Veneer Holdings LLC. Sprouse solicited investor funds through the issuance of promissory notes with the promise of repayment and high-interest payments.
The indictment is based upon C.R.S. Sec. 11-51-501. This is the Colorado Securities Act section regulating and prohibiting securities fraud. This prohibits, in connection with any sale of securities, to employ any “scheme or artifice to defraud” or to “make any untrue statement ” in the sale of securities.
Investing in house flipping is commonly considered to be securities investment. Defining what is a security is set forth by the United States Supreme Court in what is call the “Howey” test. Under the test, an investment is a security if “profits to be derived from the efforts of others.” In house flipping, investors invest in the ability of the flipper to upgrade and sell the house.
The indictment specifically alleged that Mack Jamie Sprouse made untrue statements of material fact and failed to disclose material facts to investors and engaged in business practices that operated as fraud and deceit upon investors. Sprouse allegedly misrepresented how he would use investor funds and his use and reliance on other sources of funding for Urban Veneer. The indictment alleged that Sprouse falsely led investors to believe their investments would be secured by either Urban Veneer or collateralized by specific real estate assets. However, the investments were not secured and Sprouse lacked sufficient funds to repay investors.
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