SEC Ponzi scheme probe targets California real estate fund managers

Federal regulators charge private fund executives Mark Hanf and Nam Phan over an alleged $80M real estate scheme with massive asset shortfalls.

An SEC Ponzi scheme complaint filed in federal court has targeted former executives of Novato, California-based Pacific Private Money Group LLC (PPMG) for allegedly running an $80 million offering fraud. The U.S. Securities and Exchange Commission announced civil enforcement actions against Mark D. Hanf, the former chief executive officer of PPMG, and Hoai-Nam Chu Phan, also known as Nam Phan, the former chief operating officer of a PPMG subsidiary.

According to federal regulators, the defendants solicited funds from approximately 190 mostly retail investors, including many retired senior citizens, by promising steady returns backed by real estate mortgages. Instead of generating returns through legitimate lending, the SEC alleges the defendants used funds from new investors to pay off earlier participants in a classic fraudulent structure.

Details of the SEC Ponzi scheme allegations

The SEC complaint filed in the U.S. District Court for the Northern District of California details conduct spanning from approximately December 2021 through November 2025. Regulators contend that Hanf and Phan misrepresented how capital would be deployed across two private real estate funds managed by PPMG.

Investors were reportedly informed that their principal would be used to originate or purchase commercial and residential loans secured by real estate assets. Marketing materials offered expectations of fixed or preferred rates of return derived from interest payments generated by those property loans.

However, the SEC’s investigation alleges that the returns touted to investors were not derived from actual profits earned through underlying real estate loans. Instead, Hanf and Phan allegedly relied on newly raised investor capital to satisfy promised interest payments and distribution requests to existing fund participants.

Furthermore, federal officials allege that Hanf directly misappropriated more than $7 million of investor capital for his own personal benefit during the multi-year operation of the fund enterprise.

Severe asset shortfalls uncovered in SEC Ponzi scheme investigation

The financial facade began to collapse during the autumn of 2025 when a wave of redemption demands overwhelmed the funds’ liquidity reserves. As investors sought to withdraw their principal, PPMG lacked sufficient capital to honor those redemption notices.

• Timeframe of alleged misconduct: December 2021 through November 2025.
• Total capital raised: Over $80 million from approximately 190 retail investors.
• Misappropriation amount: Over $7 million allegedly taken by former CEO Mark D. Hanf.
• Total outstanding investments: Nearly $121 million across two private funds.
• Estimated recoverable assets: Less than $17 million as of February 2026.

By February 2026, the financial scope of the collapse became fully apparent to federal investigators. Despite total outstanding investor commitments totaling nearly $121 million across the two funds, recoverable fund assets were estimated at less than $17 million, leaving investors facing catastrophic financial losses.

Jason Lee, Associate Director of the SEC’s San Francisco Regional Office, highlighted the devastating impact on investors, noting that the disparity between total obligations and recoverable assets underscores the severe harm caused when fund operators misrepresent basic operations.

Understanding private real estate fund risks and regulatory oversight

Private real estate funds operate outside the strict registration requirements of public stock exchanges, offering private placements to accredited and retail investors seeking yield. In legitimate real estate debt funds, income is derived from borrower interest payments, loan origination fees, and real property collateral.

However, private pool offerings often carry structural risks due to limited public disclosure, illiquid secondary markets, and reliance on manager integrity. Unlike publicly traded real estate investment trusts (REITs), private real estate funds are not required to publish daily net asset values or quarterly audited reports to public domain databases.

When bad actors exploit these structural characteristics, private funds can morph into an illegal SEC Ponzi scheme where fictitious stability hides underlying solvency crises. For retail investors and retirees, due diligence requires scrutinizing independent custodians, third-party fund administrators, and verified loan performance history before deploying capital into private debt structures.

Regulators emphasize that high promised yields coupled with claimed low volatility in real estate lending should serve as significant warning signs for financial market participants.

Legal settlements and parallel criminal charges

The SEC charged Hanf with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, along with Rule 10b-5. Phan was charged with violating Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5.

Without admitting or denying the allegations outlined in the SEC complaint, both Hanf and Phan consented to court judgments that permanently enjoin them from violating the charged federal securities provisions. The judgments also prohibit them from participating in the offer, issuance, or sale of securities, except for transactions in their personal accounts.

The court will determine disgorgement, prejudgment interest, and civil money penalties against Hanf, as well as civil penalties against Phan, at a later date upon motion by the SEC. In a parallel proceeding, the U.S. Attorney’s Office for the Northern District of California announced criminal charges against both executives.

Frequently asked questions

What is an SEC Ponzi scheme enforcement action? An SEC Ponzi scheme action is a civil enforcement lawsuit brought by federal regulators against individuals or institutions accused of using new investor funds to pay returns to earlier investors rather than generating genuine earnings.

What happened to investor funds in the PPMG case? Investors placed over $80 million in PPMG funds, with total fund liabilities reaching nearly $121 million, but estimated recoverable assets shrank to under $17 million by early 2026 after funds were allegedly misappropriated and misused.

Are there criminal charges in addition to the SEC action? Yes, the U.S. Attorney’s Office for the Northern District of California filed parallel criminal charges against Mark D. Hanf and Hoai-Nam Chu Phan alongside the SEC’s civil action.

This article is for information only and is not investment advice. Do your own research or consult a licensed adviser before investing.

Based on information published by U.S. Securities and Exchange Commission (SEC). Source: U.S. Securities and Exchange Commission (SEC). Spotted an error? corrections@moneypuran.com