138 investors put in $74m. The fund allegedly held just six loans
A California private mortgage fund allegedly funneled over $75 million to insider entities instead of funding real estate loans as promised.
That is the central allegation in a federal lawsuit filed on April 8 in the Northern District of California, where three investment funds are accusing Pacific Freedom Fund, Pacific Private Money, and a web of affiliated companies and individuals of running what amounts to a six-year operation to siphon investor capital away from legitimate mortgage lending.
The case, WE Alliance Secured Income Fund, LLC, et al. v. Pacific Freedom Fund, LLC, et al. (Case No. 3:26-cv-03029), paints a troubling picture for the private lending space. According to the filing, the defendants began soliciting investments around April 2020 through a Private Placement Memorandum for the Pacific Freedom Fund — a gestational mortgage fund based in Novato, California. The pitch was straightforward: investor money would go toward originating and selling loans secured by real property, primarily in California, within thirty days. In return, investors were promised a six percent annualized fixed return, paid monthly, backed by senior-lien first-position loans with defined loan-to-value ratios.
What allegedly happened was something else entirely. The filing claims that out of $74,221,216 raised from 138 investors, the fund ended up holding just six loans with a combined unpaid principal balance of $5,317,852. Only one of those — worth $189,677 — was considered collectible. The other five were either unsecured or sitting in junior lien positions, meaning any foreclosure by a senior lender would wipe them out.
Where did the rest of the money go? According to the lawsuit, the fund transferred $75,864,244 to affiliated entities controlled by the defendants. The alleged recipients included Pacific Private Money, Inc. ($38,861,179), Hanf Capital ($18,420,724), Pacific Private Money Fund ($13,747,638), Pacific Realty Development I ($4,107,125), and Pacific Mortgage Capital ($727,577). The fund was left holding $66,482 in cash.
The lawsuit names two individuals at the center of the operation. Mark Hanf, president of Pacific Private Money, Inc. and the fund's manager, allegedly earned a $250,000 annual salary before being terminated. Nam Phan, the chief operating officer, allegedly resigned on January 22, 2026 — shortly after a chief restructuring officer was brought in to assess the damage.
The three plaintiffs — WE Alliance Secured Income Fund, WE Alliance Structured Strategies Stock Allocations Fund, and WE Alliance Structured Active Allocation Growth Fund — say they are owed approximately $4.6 million and have brought ten causes of action, including racketeering under the federal RICO statute, fraud, conversion, and breach of fiduciary duty.
No court rulings have been issued, and no determination has been made on the merits. But for an industry built on trust between fund managers and the investors who back their lending operations, the allegations alone are worth watching closely.
