The Securities and Exchange Commission announced on Tuesday charges against Michael J. French, of Pendleton, and two companies controlled by him, MJF Holdings LLC and MJF Capital LLC, for allegedly defrauding investors and misappropriating millions of dollars in investor funds.
According to the SEC's complaint (pdf), French, through MJF Holdings, allegedly sold more than $20 million in high-yield promissory notes to more than 400 investors across the country.
The complaint alleges that French falsely told investors that the notes — promising 12% returns for a one-year investment — were backed by a low-risk investment program, under which the note proceeds would be loaned to small businesses and/or invested in commercial loans on a fractional basis to produce returns. The complaint also states that French claimed that the loans selected for investment to back the promissory notes were strictly underwritten and posed little risk to investors.
The SEC claims the lending program was a “sham,” and French allegedly spent the money he raised to repay earlier investors and to fund a lavish lifestyle. French ultimately defaulted on the notes and ceased communicating with investors, according to the complaint.
Per the complaint that was filed in the United States District Court for the Northern District of Georgia, the SEC charges French and MJF Holdings with violations of the Securities Act of 1933, and MJF Capital with aiding and abetting French's and MJF Holdings' alleged fraud. The complaint also names seven other entities allegedly controlled by French as relief defendants.
“This case demonstrates our commitment to acting quickly to protect investors from those who violate the securities laws to enrich themselves at investors’ expense, and to preserve remaining investor assets to the greatest extent possible,” said Nekia Hackworth Jones, regional director of the SEC’s Atlanta Regional Office. “As alleged in the complaint, Michael French swindled hundreds of investors out of over $20 million with promises of high yield returns from a non-existent commercial loan investment business.”
The SEC is seeking permanent injunctive relief, an asset freeze, an accounting, disgorgement of all ill-gotten gains plus prejudgment interest and civil penalties. The SEC's investigation was conducted by Grant Mogan, Andrew D. Mason and Tiffany Kunkle, with assistance from Taryn Hairston, the Atlanta Regional Office, and supervised by Thomas B. Bosch and Justin C. Jeffries. The litigation is being conducted by Kristin Murnahan and Graham Loomis.