Besieged Bay Area investment network seeks bankruptcy shield

A Novato-based investment company and affiliates have filed for bankruptcy protection amid a crush of investor lawsuits and government investigations.

The Chapter 11 petition by the Pacific Private Money Fund estimates the companies’ assets and liabilities each at $10 million to $50 million. The filing also estimates they have 100 to 199 creditors.

However, in a declaration filed on June 22 in support of the petition, William Brinkman, a consultant hired to restructure the organization, stated there are more than 600 creditors and investors, some of whom are elderly.

The bankruptcy filing lists 13 related investment firms operating under the Pacific Private Money umbrella. They include the Pacific Freedom Fund, the Pacific Opportunity Fund and the Arrival Fund.

Investors have filed five different lawsuits in Marin County Superior Court seeking redress for money they invested in Pacific Private Money companies.

In addition, a group of WE Alliance investor funds has sued Mark Hanf, the founder and chief executive of Pacific Private Money Inc., the original operating entity of the Pacific Private Money group, and Nam Phan, chief operating officer of PPMI. Neither Hanf nor Phan are employed by PPMI. The investor funds say they are owed $4.6 million.

Andre Borgman of Novato, who is listed among PPMI’s 30 largest creditors, said he is owed over $1 million, but he has no intention of taking legal action.

“I’m not going to put any more money into this,” Borgman said. “I’m cutting my losses at this point.”

“I put in $1.5 million, and I got distributions of $405,000 out of it, so I’m down about $1.16 million,” he said. “It was a gut punch. I lost lots of nights of sleep.”

Pacific Private Money group, which Hanf founded in 2010, originated and serviced short-term, asset-based mortgage loans. The group raised capital from private investors and lent those funds to developers and other parties. Investors were told that the loans were secured by liens against real estate.

Pacific Private Money raised capital through a series of investment funds, each organized as a limited liability company. In his declaration, Brinkman wrote that in aggregate the funds had about 400 investors holding approximately 475 accounts, with total invested capital of approximately $140 million.

Brinkman stated that Pacific Freedom Fund was designed to fund mortgage loans and sell them on the secondary market shortly thereafter, providing rapid liquidity to investors.

“When market interest rates rose sharply, the secondary market for these loans contracted,” he wrote. “By 2023, redemption requests across the funds, and particularly in PFF and Pacific Private Money Fund, exceeded available cash.”

Late last year, the group ceased making distributions and redemptions.

In their lawsuit, the “We Alliance” investor funds assert that PFF, which they invested in, had outstanding investments from 138 investors totaling over $74 million as of February.

However, PFF had investments in just six loans, which had a cumulative unpaid principal balance of about $5.3 million, leaving more than $68.9 million that was not invested, the lawsuit says.

The suit names Hanf, Phan and a number of the subsidiaries included in the bankruptcy as defendants. It accuses them of violating the Racketeer Influenced and Corrupt Organizations Act, among other offenses.

“Defendants engaged in an ‘enterprise’ whose common purpose was to solicit investments from investors to invest in the fund, collect as much money as possible for the fund, make a minimal amount of legitimate outside investments using the funds collected, and then funnel all of the other monies invested to defendants for their own personal use and gain,” the suit says.

The suit asserts that more than $18 million of the PFF money was transferred to Hanf Capital and more than $4 million to Pacific Realty Development. Both companies, according to Brinkman, are owned by Hanf.

Neither Hanf, a Tiburon resident, nor Phan, who lives in Novato, could be reached for comment. Hanf’s attorneys did not respond to emails requesting comment.

In a motion to dismiss the complaint, Phan’s attorney, Sharon Frase, argued that the suit attributed all of the wrongdoing to the defendants collectively and failed to cite any specific offenses committed by Phan. Hanf’s attorneys filed a joinder asserting that the same was true for their client.

The California Department of Financial Protection and Innovation suspended Pacific Private Money’s financial lending license in March and is conducting an investigation of PPM. The group is also being investigated by the U.S. Securities and Exchange Commission, the FBI, the Internal Revenue Service and the Marin County District Attorney’s Office.