If you are one of the roughly 190 people who invested in the Pacific Private Money Fund I or the Pacific Freedom Fund, the enforcement news matters less than the arithmetic underneath it. Thirteen Pacific Private Money entities filed for Chapter 11 protection on June 16, 2026. Against total outstanding investments of nearly $121 million, the recoverable assets of the two funds were estimated in February at less than $17 million.

The bankruptcy is necessary, but it is not the answer

The Chapter 11 cases are pending in the Bankruptcy Court for the Northern District of California, with Pacific Capital Funding Group, Inc. as the lead case, No. 26-30538. Verita is serving as claims agent, and its case website is where proof of claim forms and case documents are posted. Any investor who has not filed a proof of claim should confirm the current bar date with the claims agent and file before it passes. I would not assume that the schedules the debtors filed captured your investment accurately, and I would not assume that someone else is protecting your position.

But I think investors need to be clear-eyed about what the estate is likely to produce for them. Investors in these funds bought membership interests, which makes them equity holders in the entities that are now in bankruptcy. Section 510(b) of the Bankruptcy Code subordinates a claim for damages arising from the purchase of a security of the debtor to the claims of general creditors. In plain terms, a fraud claim against the fund that sold you the interest gets paid, in that fund’s own bankruptcy, only after the ordinary creditors are paid in full. When there is less than fifteen cents of assets for every dollar invested, waiting at the back of that line is not a recovery strategy. It is a formality worth completing while you pursue something else.

The claims worth real money are against parties who are not in bankruptcy

The first question I would ask any investor in these funds is a simple one. How did you hear about it? If a financial advisor, a registered representative, an insurance agent, an accountant, or anyone else holding themselves out as a professional put you into the Pacific Fund or the Freedom Fund, that person and the firm behind them are potential defendants, and they are not in bankruptcy. California’s Corporate Securities Law imposes joint and several liability on broker-dealers and agents who participate in a sale, and Oregon’s securities statute reaches every person who participates or materially aids in a sale, jointly and severally with the seller.

Beyond the selling side, the professionals who serviced these funds are worth examining. Accountants who prepared or reviewed financial statements, fund administrators who produced account statements, the lawyers who drafted the offering memoranda, and the financial institutions that processed the transfers between affiliated entities all had visibility that ordinary investors did not. The SEC complaint alleges that the largest single category of assets the Freedom Fund held was unsecured loans to other Pacific Private Money entities, and that the defendants directed the creation of false account statements and false Schedule K-1 forms. Those allegations raise obvious questions about who else touched those documents. Directors and officers coverage may also be available, and identifying the policies early matters, because coverage of this kind erodes as defense costs are paid.

The criminal case may be the fastest route to a dollar

Under the Mandatory Victims Restitution Act, restitution is not discretionary for wire fraud offenses, and the government is also seeking forfeiture of property traceable to the alleged scheme. Both of those processes depend on the government having an accurate list of victims and documented losses. Investors should make sure the victim witness coordinator at the United States Attorney’s Office has their contact information and their loss documentation, and should sign up for case notifications. This costs nothing and requires no lawyer. It is, however, easy to miss, and someone who is never identified as a victim will not appear in a restitution order.

The SEC’s own judgments leave disgorgement, prejudgment interest, and civil penalties against Hanf, and civil penalties against Phan, to be set by the court later on the Commission’s motion. If money is actually collected, the SEC has authority to distribute it to harmed investors through a fair fund. That is worth watching, though I would not build a plan around it. It is rare for significant restitution to be collected in these sorts of cases.

Two things to be careful about

The first is clawback exposure. In a case the government is describing as Ponzi-like, investors who received distributions exceeding what they put in are potential defendants in avoidance actions brought by the estate. The trustee’s reach under the Bankruptcy Code runs two years, and longer under state fraudulent transfer law. If you took out more than you contributed, I would not treat that money as settled, and I would get advice before spending it or reporting it in a way that assumes it is yours to keep.

The second is signing anything. That includes releases, tolling agreements, settlement offers, and questionnaires circulated in the bankruptcy or by anyone claiming to represent investors. A signature given now to resolve a small piece of this can eliminate a much larger claim later.

The clock is the real problem

Federal securities fraud claims must generally be brought within two years of discovery and in no event more than five years after the violation. California’s limitations period for its securities fraud statute runs two years from discovery or five years from the sale, whichever comes first. Oregon’s runs three years from the sale, or two years from discovery if that is later, which for an investment made in 2022 or earlier may already be a problem. The earliest investments in this scheme date to December 2021, which means the five year outer limits on some of them arrive in a matter of months. Waiting to see how the criminal case resolves, or how the Chapter 11 shakes out, is the most common way investors in these situations lose the claims that were actually worth something.

In the meantime, gather and preserve everything. Subscription agreements, private placement memoranda and any supplements, monthly or quarterly account statements, Schedule K-1s, distribution and wire records, correspondence with anyone at Pacific Private Money or with the person who recommended the investment, and your own notes of meetings. The SEC complaint specifically describes representations made in emails, in person, and in webinars in 2024, so recordings, invitations, and slide decks from those presentations are worth locating too.

One last practical note. Investors in a fraudulent scheme may be able to claim a theft loss deduction, and the Internal Revenue Service has a safe harbor for Ponzi-type losses that avoids some of the usual proof problems. Many investors here also paid tax on income allocated to them on K-1s that reflected earnings the funds did not have. Both of those are worth raising with a CPA now rather than at the filing deadline.

Nothing above is legal advice. The SEC’s allegations were resolved by consent without any admission of wrongdoing, and the criminal charges against Mr. Hanf and Mr. Phan have not been proven. If you invested in the Pacific Private Money funds and want to talk through what your options look like, please don’t hesitate to let me know.

The Securities and Exchange Commission (SEC) has taken decisive legal action against Tilila Walker Sumchai, a resident of Richmond, California, accusing her of orchestrating a sophisticated and egregious fraudulent securities offering. This elaborate scheme, according to the SEC, succeeded in raising a staggering $11.8 million from over 1,000 investors, specifically targeting members of the Tongan American community residing across the United States.

The SEC’s complaint paints a detailed picture of Sumchai’s alleged misconduct, spanning from approximately January 2021 to October 2021. During this period, Sumchai is said to have employed deceptive tactics to persuade retail investors to engage in what she presented as a lucrative investment opportunity named “Tongi Tupe.” Central to her sales pitch was the false assurance that a proprietary and undisclosed algorithm would generate guaranteed high returns for investors.

What makes this case particularly insidious, as outlined in the SEC’s complaint, is the strategic targeting of influential Tongan American leaders in the initial phase of the operation. These leaders, it is alleged, were enticed with substantial returns on their investments, a move calculated to lend an air of legitimacy to Tongi Tupe. Subsequently, Sumchai purportedly organized exclusive meetings hosted by these leaders, where she actively promoted Tongi Tupe to other members of the Tongan American community.

The promises made during these presentations were nothing short of extravagant, with Sumchai allegedly assuring potential investors of exceedingly high returns. One notable example cited in the complaint is a promise of a $146,000 profit within a mere 16 weeks from a relatively modest $3,000 investment. However, the SEC contends that these promises were nothing more than a façade, as Tongi Tupe allegedly functioned as a Ponzi scheme. The operation relied on the influx of funds from new investors to pay returns to earlier participants, creating a deceptive cycle.

Beyond the Ponzi scheme allegations, the complaint further accuses Sumchai of diverting investor funds for personal and unauthorized purposes. These include expenditures on casino trips, travel, and shopping, raising questions about the misappropriation of funds intended for the purported investment opportunity.

Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, emphasized the gravity of the situation, stating, “As we allege in our complaint, Sumchai sought to enrich herself by exploiting retail investors within the Tongan American community. The SEC will continue to aggressively pursue affinity frauds, which prey on the trust that members of a close-knit community have in each other.”

The legal action, filed in the U.S. District Court for the Eastern District of California, comprises charges against Sumchai for violating antifraud provisions of federal securities laws. The SEC is seeking a range of remedies, including permanent injunctions, disgorgement with prejudgment interest, a civil penalty, and an officer and director bar.

The FBI is also interviewing victims of the Ponzi scheme.

The rule aims to amend the regulatory definition of the term “fiduciary.” In doing so, it intends to provide a more appropriate and specific definition for individuals or entities that provide investment advice for a fee to employee benefit plans and individual retirement accounts (IRAs). This clarification is significant because it determines when such individuals or entities are considered fiduciaries, thereby subjecting them to certain legal and ethical obligations regarding the handling of retirement accounts and investments.

This new amendment to the fiduciary rule encompasses a wide range of aspects related to investment practices, plan sponsors, participant expectations, and individuals holding IRAs who are seeking or receiving investment advice. Additionally, it considers developments in the investment marketplace, especially focusing on compensation structures that might create conflicts of interest for advisers.

The process for implementing this rule has been ongoing for some time. The proposed rule has been under review since September, and now that it is being made available for public comments, this comment period is expected to last for 60 days. After collecting and considering these comments, the Department of Labor (DOL) will work on shaping the final regulation, which could take an additional 60 to 90 days. Following this, the rule will undergo review by the Office of Management and Budget (OMB), and, after another 30 to 60 days, it will be published in its final form in the Federal Register.

The history of this rule dates back to 2016 when the DOL first pursued a fiduciary rule that expanded the definition of who could be considered a fiduciary and replaced a previous five-part test. However, it was struck down in 2018 by a federal appeals court. A less rigid version of the rule was finalized in 2020 during the Trump administration. The current version of the new rule has also faced strong opposition, with critics arguing that it may negatively impact retail investors and their ability to save for retirement.