SEC Charges South Carolinian with Operating $20 Million Ponzi Scheme
The Securities and Exchange Commission announced charges against Michael J. French, of Pendleton, South Carolina, and two companies controlled by him, MJF Holdings LLC and MJF Capital LLC, for allegedly defrauding investors and misappropriating millions in investor funds via a Ponzi scheme.
According to the SEC’s complaint, French, through MJF Holdings, sold more than $20 million in high-yield promissory notes to over 400 investors throughout 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 thus posed little risk to investors.
According to the SEC, the lending program was a sham, and French 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.
French was arrested on Feb. 28, 2023 in Florida and charged with several crimes, including aggravated stalking, intimidation and tampering with a witness who reportedly has information about the allegations detailed in the SEC’s complaint. At the time of his arrent, French was found in possession of numerous forged Federal Bureau of Investigation documents that falsely stated he had been released from investigation by a number of entities, including the SEC.
The complaint charges French and MJF Holdings with violations of SEC rules. The complaint also charges MJF Capital with aiding and abetting French’s and MJF Holdings’ alleged fraud. It names as relief defendants seven other entities allegedly controlled by French.
The SEC seeks permanent injunctive relief, an asset freeze, an accounting, disgorgement of all ill-gotten gains plus prejudgment interest and civil penalties.
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