The U.S. Securities and Exchange Commission has opened an inquiry into the $166 million Sortis Income Fund, an affiliate of investment firm Sortis LLC, according to three people familiar with investors' communications with the agency's enforcement division. The Oregon Division of Financial Regulation also has an open securities investigation, an agency spokesperson confirmed, though the agency declined to identify which Sortis entity is the target.

The scrutiny comes as a Texas investor, Stillwater Portfolio, has sued in Multnomah County Circuit Court, alleging the fund made "risky loans to Sortis-owned businesses, including Bamboo Sushi and Rudy's Barbershop" and that managers "concealed this fact from investors." Sortis has moved to send the case to private arbitration and says it "categorically disputes" the allegations.

Paul Brenneke, Sortis's top executive, was interviewed by the SEC in Washington, D.C., earlier this year, according to a person informed about the meeting. Brenneke declined to confirm or deny the interview or any investigation, saying in a statement released by his attorneys that "an alleged regulatory interview, standing alone, does not establish wrongdoing" or "identify the subject of an investigation." He said he would not discuss nonpublic regulatory communications.

Brenneke also said the fund's operating agreement expressly permits loans between affiliated companies without investor notification or consent, and that he took over management of the fund after the loans were issued. He said neither the fund nor its managers have received a Wells Notice, the formal warning the SEC issues before bringing charges. A Wells Notice "doesn't mean that much" in terms of timing, said Terrence Blackburne, an Oregon State University accounting professor who studies SEC investigations, noting that the agency's inquiries can run for years.

The Sortis Income Fund launched in 2016 promising to use investor money to buy real estate-backed loans. Securities filings from early 2025 reported it had raised $166 million from 775 investors, with regulatory assets under management valued at $177 million as of December 2025.

The fund is separate from but related to Sortis Holdings, now called SoHi Brands, which invested in a cluster of popular Northwest brands during the pandemic. SoHi Brands ran into a cash crunch that led to missed paychecks and rent payments, and it narrowly avoided a creditor-forced bankruptcy last year after a failed $85 million deal to buy the Ace hotel group.

The SEC has sought information about the Sortis Income Fund and, according to one source, about other Sortis entities. The agency declined to comment. The three sources, who requested anonymity citing fear of retaliation, showed timestamped emails from the same SEC enforcement division lawyer, with interactions dating from spring 2025 to this summer.

The state investigation appears to have begun within the past two years. The Oregon Division of Financial Regulation first acknowledged holding investigative documents in an October denial of a public records request. A spokesperson, Jason Horton, called it an "open investigation" but declined further comment, citing state law barring discussion of active inquiries. A law firm representing Sortis said neither Brenneke nor the company "has ever been contacted by the Oregon Division of Financial Regulation concerning the purported investigation."

The investigations add to a growing set of legal and financial challenges for Sortis and its affiliated brands, which became a prominent presence in Portland's restaurant and retail scene. Investors have complained in court documents about the fund's loans to the consumer businesses, and Sortis in 2024 sued its former finance chief, Jef Baker, after he spoke with a reporter. Baker and Sortis reached a confidential settlement this April, and a Multnomah County judge barred Baker from speaking to media or investors about the company.

It is not clear whether the state and federal probes are related to the loans at issue in the Stillwater lawsuit. The SEC's enforcement manual generally recommends converting preliminary inquiries into formal investigations or closing them within 60 days, but Blackburne's database of SEC investigations shows an average length of three and a half years.