Posted on: September 25, 2025 11:50 AM

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California man arrested In Brazen USD10 million loan fraud scheme designed to dupe the SEC

United States Attorney for the Southern District of New York, Jay Clayton, and Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Christopher G. Raia, announced the unsealing of an Indictment charging MAX MCDERMOTT with wire fraud and money laundering in connection with his scheme to fraudulently obtain a $10 million loan and then launder and misappropriate the funds, including to repay investors in an attempt to avoid liability during an investigation by the U.S. Securities and Exchange Commission (“SEC”).  MCDERMOTT was arrested today in Newport Beach, California, and will be presented later today in the Central District of California.  The case is assigned to U.S. District Judge Arun Subramanian.

“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.”

As alleged in the Indictment:[1]

MCDERMOTT is the founder and owner of several companies in the real estate industry.  In late 2020, MCDERMOTT learned that he was under investigation by the SEC for his actions in connection with his real estate lending and investment company.  In an effort to dissuade the SEC from taking enforcement action, MCDERMOTT sought to quickly repay tens of millions of dollars to investors of the company under investigation and, toward that end, borrowed money under false pretenses.  Specifically, MCDERMOTT made false and misleading representations to obtain a $10 million loan purportedly to grow his other businesses.  MCDERMOTT also hid the existence of the SEC’s investigation from his lender and lied about his use of the loan proceeds.  Once MCDERMOTT received the $10 million loan, he laundered the funds to conceal the fact that he was using the money to benefit himself and to help repay investors, rather than use the funds to grow his other businesses as he had falsely claimed.

MCDERMOTT, 57, of Newport Beach, California, is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison.

The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Clayton praised the outstanding work of the FBI.

From DOJ