RALEIGH, N.C. (WNCN) — Two brothers from southeastern North Carolina have pleaded guilty to using their family insurance business to run a multimillion dollar Ponzi scheme, federal prosecutors say.

The U.S. Department of Justice said Tuesday that Joseph W. Floyd IV and William F. Floyd Jr., of Whiteville, entered their pleas Monday to charges of conspiracy to sell and deliver unregistered securities.

They each face up to five years in prison, three years of supervised release and a $250,000 fine at sentencing.

Prosecutors say the brothers offered a “loan program” through Floyd’s Insurance Agency in Whiteville in which more than 150 people and businesses invested money in exchange for interest-bearing promissory notes that were never registered with the Securities Exchange Commission as required by law.

The loan program offered interest rates between 6 percent and 10 percent, and those promissory notes — which were personally guaranteed by the Floyds — said the investors’ principal was repayable within a year, prosecutors said.

They were accused of initially using the borrowed funds to extend credit to a Chapel Hill company they co-owned that financed insurance premiums for consumers.

By 2012, prosecutors said, the insurance agency had borrowed more than $20 million from investors and was not able to service that debt through any legitimate business source — so to avoid bankruptcy, they operated the loan program as a Ponzi scheme in which funds from more recent investors were used to pay principal and profits to existing investors.

Prosecutors alleged the brothers concealed the agency’s insolvency from investors and continued to accept investments.

The agency filed for bankruptcy in May 2020 and the brothers filed for personal bankruptcy three months later.