SEC Charges South Carolina Resident with Operating $20 Million Ponzi Scheme

The Securities and Exchange Commission today announced charges against Michael J. French, of Pendleton, South Carolina, and two companies controlled by him, MJF Holdings, LLC (“MJF Holdings”) and MJF Capital, LLC (“MJF Capital”), for defrauding investors and misappropriating millions in investor funds.

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’s complaint, the lending program was a sham, and French spent the money he raised to repay earlier investors and to fund a lavish lifestyle. The complaint also states that French ultimately defaulted on the notes and ceased communicating with investors.

The complaint, filed in the United States District Court for the Northern District of Georgia, charges French and MJF Holdings with violations of the registration provisions of Section 5 of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint charges MJF Capital with aiding and abetting French’s and MJF Holdings’ alleged fraud. The complaint also 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.

The SEC’s investigation was conducted by Grant Mogan, Andrew D. Mason and Tiffany Kunkle, with assistance from Taryn Hairston, all of 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.