Jay Clayton, U.S. Attorney for the Southern District of New York | Department of Justice
A California man has been arrested and charged with wire fraud and money laundering after allegedly orchestrating a scheme to obtain a $10 million loan under false pretenses. According to the United States Attorney for the Southern District of New York, Jay Clayton, Max McDermott was taken into custody in Newport Beach, California, and is expected to appear in court in the Central District of California. The case will be overseen by 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.”
FBI Assistant Director in Charge Christopher G. Raia commented on the charges: “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.”
Court documents allege that McDermott is the founder and owner of several real estate companies. In late 2020, he became aware of an ongoing Securities and Exchange Commission (SEC) investigation regarding one of his real estate lending and investment businesses. Authorities claim that in order to prevent enforcement action from the SEC, McDermott sought to quickly repay tens of millions of dollars owed to investors using funds obtained through deception.
The indictment states that McDermott made false statements about how he would use the $10 million loan, claiming it was for business growth while hiding both the SEC investigation from his lender and his actual intentions for using the money. After receiving the funds, he is accused of laundering them so it appeared they were used appropriately while actually directing them toward repaying investors and benefiting himself.
McDermott faces one count each of wire fraud and money laundering; both charges carry maximum sentences of 20 years in prison if convicted. Sentencing decisions will ultimately be determined by a judge.
U.S. Attorney Clayton recognized “the outstanding work of the FBI” on this case.
The prosecution is being handled by Assistant U.S. Attorney Qais Ghafary from the Office’s Complex Frauds and Cybercrime Unit.
Officials remind that all charges are allegations at this stage; McDermott is presumed innocent unless proven guilty in court.
