Michael J. French of Pendleton, South Carolina and two companies controlled by him, MJF Holdings LLC and MJF Capital LLC, have been charged with allegedly defrauding investors and misappropriating millions in investor funds, the Securities and Exchange Commission announced April 4.
According to the SEC’s complaint, operating through MJF Holdings, French sold more than $20 million in high-yield promissory notes to over 400 investors throughout the country.
The complaint, which also charges MJF Capital with aiding and abetting French’s and MJF Holdings’ alleged fraud, also claims:
- French 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.
- French claimed the loans selected for investment to back the promissory notes were strictly underwritten and posed little risk to investors.
- The lending program was a sham and French spent the money he raised to repay earlier investors and to fund a lavish lifestyle.
- French defaulted on the notes and ceased communicating with investors.
The SEC also names seven other entities allegedly controlled by French as relief defendants or non-culpable third-parties.
French is charged with violating:
- Registration provisions of Section 5 of the Securities Act of 1933
- Antifraud provisions of Section 17(a) of the Securities Act of 1933
- Antifraud provisions Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
“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.
