Investors sue private mortgage fund, allege $74M funneled to insiders

Three investment funds are accusing a California private mortgage operation of draining $74 million in investor capital through a web of insider transfers. 

WE Alliance Secured Income Fund, WE Alliance Structured Strategies Stock Allocations Fund, and WE Alliance Structured Active Allocation Growth Fund filed suit in the Northern District of California on April 8, targeting Pacific Freedom Fund, Pacific Private Money Inc., and a constellation of affiliated entities controlled by Mark Hanf and Nam Phan (WE Alliance Secured Income Fund v. Pacific Freedom Fund LLC et al., Case No. 3:26-cv-03029). 

The suit paints a damning picture. Starting around April 2020, the defendants allegedly pitched investors on a gestational mortgage fund through a Private Placement Memorandum. The promise was straightforward: capital would flow into short-term, real property-secured loans, sold within 30 days, generating a six percent annualized return. Pacific Private Money Inc. would manage the fund, with Hanf at the helm. 

At least 138 investors put in a combined $74,221,216. According to the filing, the fund ended up holding just six loans worth $5,317,852 in unpaid principal. Five of those were either unsecured or stuck in junior lien positions, rendering them essentially worthless. Only one, carrying a balance of $189,677, was deemed collectible. 

Where did the rest go? The suit claims $75,864,244 was shuffled among the defendants' own entities: $38.8 million to Pacific Private Money Inc., $18.4 million to Hanf Capital, $13.7 million to Pacific Private Money Fund, $4.1 million to Pacific Realty Development I, and $727,577 to Pacific Mortgage Capital. The fund was allegedly left with $66,482 in cash. 

The unraveling began in January 2026 when investors learned that a Chief Restructuring Officer, Bill Brinkman, had been brought in. In a January 23 email to investors, Brinkman described cash balances as "critically minimal" and flagged that recoveries would likely be "a fraction of total capital provided by investors." Phan resigned the day before, on January 22. 

A subsequent February 17 memorandum revealed that the SEC had informed Pacific Private Money of an investigation as early as August 2025. California's Department of Financial Protection and Innovation followed with its own probe in November 2025. 

The three WE Alliance funds say they are out roughly $4.6 million combined. The suit advances 10 causes of action including RICO, fraud, concealment, conversion, and breach of fiduciary duty. 

No determination on the merits has been made. The case is in its earliest stages. 

For advisors and fund managers, the allegations are a stark reminder of the due diligence risks embedded in private placement vehicles, particularly those run through layered affiliate structures where capital can move between entities with little outside visibility.