A Manhattan-based lending company and its owner have been charged with repeatedly lying to investors who purchased high-yield securities, the SEC announced Wednesday.

Also charged in the scheme that raised approximately $8.6 million between 2011and 2013 are the brokerage firm that acted as the placement agent and two of its executives.

The SEC alleges that American Growth Funding II LLC and its owner, Ralph Johnson, promised investors 12 percent annual returns and falsely claimed its financial statements were being audited each year. AGF II, which raises capital from investors to provide loans to businesses, also made misrepresentations in offering documents about its management and concealed details about deteriorating loan values that could imperil full payment of the promised returns to investors, the SEC says.

The company’s placement agent, Portfolio Advisors Alliance, and its owner Howard Allen and president Kerri Wasserman knew the offering documents were inaccurate and yet continued using them to solicit sales of AGF II securities, the SEC says.

“We allege that AGF II misled investors and overstated the true value of these investments, which are worth far less than presented because many of the company’s loans are non-performing,” says Andrew M. Calamari, director of the SEC’s New York regional office.  “We further allege that Allen and Wasserman looked the other way and allowed PAA to facilitate the fraud as the placement agent.”

According to the SEC’s complaint filed in federal district court in Manhattan, Johnson sent out AGF II monthly account statements to investors that concealed the precariousness of its business. The company failed to disclose that it could not possibly have paid investors their stated account balances because the majority of AGF II’s loans were likely uncollectible at the time.