A California man has been arrested for allegedly orchestrating a $10 million loan fraud scheme designed to mislead the U.S. Securities and Exchange Commission (SEC). The United States Attorney for the Southern District of New York, Jay Clayton, and Christopher G. Raia, Assistant Director in Charge of the FBI’s New York Field Office, announced that Max McDermott was taken into custody in Newport Beach, California. He is charged with wire fraud and money laundering.
McDermott is accused of securing a $10 million loan under false pretenses, claiming it would be used to grow his businesses. Instead, authorities allege he concealed an ongoing SEC investigation from his lender and diverted the funds to repay investors in an effort to avoid liability during the regulatory probe.
“As alleged, Max McDermott orchestrated a scheme to steal millions by obtaining a loan purportedly to grow two of his companies,” said U.S. Attorney Jay Clayton. “McDermott was already under investigation by the SEC in connection with his operation of a different company, a fact that he concealed from his lender. He then misappropriated the loan money to help convince the SEC not to sue him. McDermott’s arrest is a reminder that those who swindle investors get caught and face federal criminal exposure for their conduct.”
“Spurred by a separate investigation, Max McDermott allegedly paid outstanding obligations through a misappropriated $10 million loan intended for future business expansion,” said FBI Assistant Director in Charge Christopher G. Raia. “The defendant allegedly made repeated attempts to avoid regulatory consequences by creating an illicit repayment system built on deceit and betrayal. The FBI will never cease to investigate any individual who exploits financial institutions to conceal failed investments and perpetuate dishonest swindles.”
According to court documents, McDermott founded several real estate industry companies and learned in late 2020 that he was under SEC investigation regarding one of them. To dissuade enforcement action from the SEC, prosecutors allege he borrowed money using misleading statements about its purpose while hiding details about the ongoing investigation.
McDermott faces charges of wire fraud and money laundering, each carrying a maximum sentence of 20 years in prison if convicted. Sentencing will be determined by a judge if there is a conviction.
Jay Clayton commended the work of the FBI on this case.
The prosecution is being handled by the Complex Frauds and Cybercrime Unit within the U.S. Attorney’s Office for the Southern District of New York, with Assistant U.S. Attorney Qais Ghafary overseeing proceedings.
All charges are currently allegations; McDermott is presumed innocent unless proven guilty.
