WASHINGTON - The Securities and Exchange Commission has initiated litigation against PinnFund USA Inc., a subprime mortgage company in Carlsbad, Calif., as well as its CEO and an associate.

A judge for the U.S. District Court for the Southern District of California issued a temporary restraining order to halt "ongoing securities fraud" by the executive, Michael J. Fanghella, and James L. Hillman.

According to the SEC, the two raised about $276 million from 166 investors, purportedly for PinnFund's residential mortgage business. Mr. Fanghella and Mr. Hillman misappropriated the money and used it "to finance Fanghella's lavish lifestyle," including an estimated $10 million to buy a $5 million home, furnishings, and other accessories for his former girlfriend, an adult-film star, the SEC says.

Kelly Cook, a.k.a. Kelly Jaye, a former cheerleader for the Atlanta Hawks and star of almost a dozen films for Vivid Video, is reportedly fighting to keep the $5.2 million house in Laguna Niguel, Calif. The San Diego Daily Transcript reported that Ms. Cook had transferred ownership of the home to a company she controls.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.