SEC Charges Bay Area Fund Executives In Alleged Ponzi-Like Scheme

The Securities and Exchange Commission has charged two former executives of a Novato, California-based private lending firm with running a multimillion-dollar offering fraud that regulators say resembled a Ponzi scheme. The action targets Mark D. Hanf, former chief executive officer of Pacific Private Money Group LLC, and Hoai-Nam Chu Phan, former chief operating officer of a PPMG subsidiary.

According to the SEC, Hanf and Phan solicited investor funds under false pretenses, misrepresenting how the money would be used and the financial health of the funds they managed. Rather than deploying capital as promised to investors, the agency alleges the executives used new investor contributions to pay returns owed to earlier investors, a hallmark structure of Ponzi-style fraud. The commission’s announcement characterizes the scheme as involving multiple millions of dollars raised from investors who believed they were participating in legitimate private lending and real estate-backed investment opportunities.

Pacific Private Money Group operated as a private lender in the San Francisco Bay Area, an industry segment that typically offers short-term, asset-backed loans to real estate investors and developers who may not qualify for traditional bank financing. Private lending funds often market themselves to investors as a way to earn steady returns backed by collateral such as property liens. The SEC’s complaint suggests that the actual financial condition of PPMG’s funds diverged sharply from what investors were told, with the alleged commingling and misuse of funds forming the core of the government’s case.

The charges add to a long list of enforcement actions the SEC has pursued against private fund managers in recent years, as regulators have intensified scrutiny of alternative investment vehicles marketed directly to retail and accredited investors outside traditional public markets. Private funds, including real estate lending pools, have grown significantly in popularity as investors sought yield in a prolonged low-interest-rate environment and, more recently, as alternatives to volatile public equities.

Industry observers note that private lending funds occupy a regulatory gray area compared with publicly traded securities, since they are often sold through private placements with fewer disclosure requirements. That structure can leave investors more reliant on the representations of fund managers regarding loan performance, collateral value, and fund solvency. Enforcement attorneys who track SEC actions say cases involving alleged Ponzi-like conduct in private real estate and lending funds have become more frequent as examiners dig into fund-level accounting and cash flow patterns that do not match reported investor returns.

The SEC’s Enforcement Division has in recent years built out specialized units focused on complex financial products and asset management, reflecting a broader push to catch fraud in less-regulated corners of the investment world before losses mount. Cases like the one against Hanf and Phan often follow investor complaints, whistleblower tips, or discrepancies uncovered during routine fund audits. When Ponzi-like structures unwind, the financial damage to investors can be severe, particularly when funds have used new capital to mask insolvency for extended periods.

The SEC’s complaint seeks various forms of relief typical in offering fraud cases, including disgorgement of allegedly ill-gotten gains, civil monetary penalties, and injunctions barring the defendants from future securities violations. The regulatory action does not constitute a finding of guilt, and the allegations will need to be resolved through litigation or settlement in federal court.

The SEC noted that its investigation into the matter is ongoing, and further developments involving related parties or additional charges may follow as the case proceeds.

This report is based on a press release from the U.S. Securities and Exchange Commission.