Marin County prosecutors have launched an investigation into Pacific Private Money Inc., a Novato-based real estate lending firm. The firm's sudden collapse has left over 100 investors in a state of panic, with estimates suggesting that most of the more than $100 million they invested may be lost.
Deputy District Attorney Sean Kensinger, who leads the Consumer Protection Unit, confirmed his office is looking into complaints. He urged potential victims of "unlawful business practices or consumer fraud" in Marin County to come forward.
Key Takeaways
- Pacific Private Money Inc. is under investigation by Marin County prosecutors.
- Over 100 investors face potential losses exceeding $100 million.
- The company stopped all payments to investors late last year.
- An outside contractor estimates net recoveries will be a "fraction" of total capital.
- CEO Mark Hanf has a history of regulatory issues, including commingling funds.
Investors Face Significant Losses
Pacific Private Money stopped all payments to its investors late last year. Emails and interviews with affected individuals reveal the dire situation. The firm, which managed a group of individual funds, specialized in short-term bridge loans and other "hard money" loans for property owners.
These loans, typically with one or two-year terms, offered faster funding and fewer restrictions compared to traditional bank loans. They served commercial and residential real estate deals where speed or flexibility was crucial, often for borrowers with less-than-perfect credit scores.
Investment Snapshot
- Total Funds Under Investigation: Over $100 million
- Number of Investors Affected: More than 100
- Estimated Recovery: A fraction of total capital
- Typical Loan Interest Rates: 8.5% to 12%
Bill Brinkman, an outside contractor now managing the firm, delivered a grim outlook to investors. In a January 23 email, Brinkman stated that based on his team's initial analysis, "net recoveries… will be a fraction of total capital provided by investors." The company's cash reserves are reportedly so low that it cannot even afford to hire experts to fully assess its finances.
"This was my nest egg to get me through the rest of my life," said Michelle St. Claire, an artist whose $500,000 investment with the firm is now potentially gone. "I’m way past retirement age… I’m scared to death. All I can think about is what I’ll do to survive."
Many investors, like St. Claire, had placed their retirement savings into Pacific Private Money's funds. Her investment included $200,000 from a divorce settlement, invested without her knowledge by her ex-husband. She had attempted to withdraw her funds repeatedly over the past three years without success.
Company Operations and Lending Practices
Pacific Private Money, founded in 2008, publicly stated it had funded over 3,000 loans totaling more than $2 billion since its inception. The firm operated by pooling investor money to make loan investments, then paying investors a fixed return. This differs from traditional "hard money" lending where investors directly loan money to borrowers.
The company was licensed in California and seven other states, including Colorado and Arizona, as well as the District of Columbia. Property records confirm that Pacific Private Money and its affiliates financed hundreds of loans across California since 2013.
What are Hard Money Loans?
Hard money loans are short-term loans secured by real estate. They are often used by investors or borrowers who need quick funding, may not qualify for traditional bank loans, or require more flexible terms. While they offer speed, they typically come with higher interest rates and fees. Industry experts note that private money lending has a "legitimate place" in real estate finance but should be a "strategic choice, not a default solution."
Despite pausing investor distributions, one of Pacific Private Money’s funds, Arrival Home Loans LLC, continued to operate at a reduced level. Mortgage records show that as recently as early January, months after investor payments ceased, the firm was still issuing new loans. This included a significant $2.4 million loan for a single-family home in Santa Clara County, issued with a year-long term and backed by the property as collateral.
The firm reportedly shut down all operations earlier this month, with its Novato office now closed and all signage removed. An advertisement promising "up to 9%" returns, once displayed in the window, is no longer visible.
Mark Hanf's Troubled Business History
Concerns about Pacific Private Money are compounded by the past business dealings of its founder, Mark Hanf. Hanf, a Tiburon entrepreneur, has a history of regulatory issues.
- 2007 Bankruptcy: Hanf filed for Chapter 7 bankruptcy protection, reporting over $2 million in debt against $24,000 in assets.
- 2014 Discipline: The California Bureau of Real Estate fined Hanf more than $18,000 and suspended his real estate broker license for 45 days. An audit revealed he had illegally commingled funds, placing investor money into his own bank accounts instead of designated trust accounts. He also failed to report a "self-dealing" transaction where he loaned $500,000 of client funds to a company he managed.
These past actions raise serious questions about the firm's financial management and transparency. Hanf has not responded to requests for comment.
Legal Challenges and Accusations
Pacific Private Money has also faced legal challenges. A 2023 lawsuit in Alameda County Superior Court accused the firm of breaching fiduciary duties and violating laws designed to protect borrowers from misleading practices. The complaint, filed by Berkeley homeowners, alleged they received a $2.1 million loan with a 9% interest rate but were later hit with excessive late fees and saw their interest rate increase to 14% without full disclosure.
The homeowners eventually sold their property in 2024 and dismissed the case, but the precise outcome remains unclear from online court records.
Federal Lawsuit Alleges Systematic Fraud
More recently, Mark Brown, a Texas-based investor and former co-manager of one of Pacific Private Money’s funds, the Pacific Southwest Note Fund, filed a federal lawsuit in February. Brown alleges that Hanf and his former business partner, Edward Brown (no relation), engaged in a "systematic scheme to defraud" him.
Mark Brown claims he identified "serious irregularities in the handling of investor funds," including allegations of misapplication of funds and unauthorized financial transactions. His lawsuit states that Hanf and Edward Brown transferred over $10 million in mortgage loan assets from the Pacific Southwest Note Fund into Hanf’s other accounts for "personal benefit," without proper approvals.
After Mark Brown raised these concerns, he claims he was shut out of the business and denied access to records. He also alleges Hanf and Edward Brown falsely claimed he had resigned. Mark Brown requested the court freeze Pacific Private Money’s assets, warning of an "unauthorized ‘wind-down’ process." The court denied this motion, instead ordering the case to arbitration.
Just eight days later, Hanf informed investors of the fund's financial difficulties. Mark Brown stated this confirmed his fears about asset dissipation. He himself invested over $440,000 in the fund and now shows a negative balance of $17,500.
Edward Brown, the former business partner, denied Mark Brown's allegations. He stated he had no role in managing the Pacific Southwest Note Fund's finances and retired last April. Edward Brown, who also invested with Hanf, said he does not believe Hanf intended to defraud investors, but acknowledged Hanf "definitely did something he shouldn't have done and he's gonna get in deep deep trouble for it."
