(March 26 – 18:00 ET) – The U.S. Securities and Exchange Commission has succeeded in getting a temporary restraining order, putting an end to what it calls an ongoing US$276 million securities fraud.

The SEC says that the Hon. Marilyn Huff, U.S. District Judge for the Southern District of California, issued a temporary restraining order regarding a massive securities fraud by Michael Fanghella, James Hillman, and PinnFund USA Inc. The court ordered the defendants to immediately cease their fraudulent activities, and placed a freeze on the assets of Fanghella and PinnFund. It also appointed a temporary receiver over PinnFund, pending a hearing to determine the full extent of the fraudulent conduct. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for April 2.

The commission alleges that since 1993, Fanghella, Hillman, PinnFund and companies controlled by Fanghella and Hillman have raised at least US$276 million from at least 166 investors, purportedly to fund PinnFund’s business of writing residential mortgages. However, it says the defendants are “misappropriating the funds … and using the funds to finance Fanghella’s lavish lifestyle.”

The SEC also says the defendants have circulated altered financial statements of PinnFund and forged auditors’ reports. The reports concealed more than US$95 million in losses incurred by PinnFund since 1997 and the transfer of more than US$107 million to Fanghella since 1997.

In addition to the interim relief granted today, the SEC seeks a final judgment against Fanghella, Hillman, and PinnFund enjoining them from future violations, ordering them to disgorge all ill-gotten gains, and assessing civil penalties against them.