A California man has been arrested and charged with wire fraud and money laundering in connection with a $10 million loan scheme. The U.S. Attorney for the Southern District of New York, Jay Clayton, and FBI Assistant Director in Charge Christopher G. Raia announced that Max McDermott was taken into custody in Newport Beach, California. He is accused of obtaining a large loan under false pretenses and then using the funds to repay investors while under investigation by the U.S. Securities and Exchange Commission (SEC).
“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.”
FBI Assistant Director in Charge Christopher G. Raia added: “Spurred by a separate investigation, Max McDermott allegedly paid outstanding obligations through a misappropriated $10 million loan intended for future business expansion. 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 allegations outlined in the indictment, McDermott founded several real estate companies and learned in late 2020 that he was being investigated by the SEC for activities related to one of these firms. In response, he sought new funding under false claims that it would be used for business growth but instead directed it toward repaying investors from the company under scrutiny.
McDermott faces one count each of wire fraud and money laundering; both charges carry maximum sentences of 20 years if convicted. Sentencing will ultimately be determined by a judge.
The case is assigned to U.S. District Judge Arun Subramanian and is being prosecuted by Assistant U.S. Attorney Qais Ghafary from the Complex Frauds and Cybercrime Unit.
Mr. Clayton praised the work of law enforcement involved in bringing these charges forward.
It should be noted that all charges are allegations at this stage, and McDermott is presumed innocent unless proven guilty.
