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The Securities and Exchange Commission today charged two North Carolina businessmen with running an offering fraud that raised nearly $6 million from investors, some of whom were family and friends.

The SEC’s complaint, filed in U.S. District Court in Charlotte, North Carolina, alleges that Dana J. Bradley and Marlin S. Hershey of Cornelius, North Carolina, told investors they would use investor funds to make loans to real estate developers who would then use the money to acquire and rehabilitate homes in Charlotte, North Carolina. In truth, the complaint alleges, they used a large portion of the funds to pay themselves more than $1 million in commissions and repay principal and interest due to other investors. The complaint further alleges that Bradley and Hershey oversaw three securities offerings for a third-party real estate developer in Florida and, in connection with those offerings, operated as unregistered brokers and received approximately $2.1 million in commissions.

The SEC’s complaint charges Bradley, Hershey, and entities under their control with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Bradley and Hershey with violating the broker-registration provisions of Section 15(a) of the Exchange Act, and entities under their control with aiding and abetting those violations. The SEC is seeking a permanent injunction, an accounting, disgorgement, prejudgment interest, and civil money penalties.

The SEC’s investigation was conducted by Mark Eric Harrison and John Nemeth in the SEC’s Atlanta Regional Office and supervised by Justin Jeffries. The litigation will be led by Paul Kim under the supervision of Graham Loomis.