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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.
The SEC is warning investors to be cautious when considering high-yield investments and to thoroughly research any claims made by investment companies. In addition, the SEC urges investors to be wary of fraudulent investment videos featuring well-known figures, such as Elon Musk, as they may be a ploy to lure unsuspecting individuals into fraudulent schemes.
The SEC’s investigation into French and his companies is ongoing, and the Commission is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
Investors who believe they may have been a victim of this alleged fraud are urged to contact the SEC’s Office of Investor Education and Advocacy at (800) 732-0330 or submit a tip online. It is important for investors to protect themselves by staying informed and being cautious when it comes to investing their hard-earned money.