Lying to a Bank for a $10 Million Loan about not being under SEC Investigation is a Bad Idea
October 31, 2025
Bob Coleman
Founder & Publisher, Coleman Report
Fraud Friday: Lying to a Bank for a $10 Million Loan about not being under SEC Investigation is a Bad Idea
Federal agents arrested Max McDermott of Newport Beach, California last month for misappropriating a $10 million bank loan. Prosecutors say the money was supposed to expand his escrow and real-estate companies through new acquisitions. Instead, McDermott diverted nearly all of it to repay old investors in an attempt to quiet an ongoing Securities and Exchange Commission investigation.
Since 2021, the SEC had been examining McDermott’s role in a $100 million investment scheme tied to his company, Secured Income Group. Facing mounting pressure, he turned to the bank loan to cover investor obligations and conceal losses. What was documented as a business expansion became, according to federal prosecutors, a deliberate misuse of bank funds designed to keep regulators at bay.
After the transfers, McDermott kept the lender, identified in court records as Lender-1, from learning the truth. For months, he assured the banker that acquisitions were still underway. In early October 2022, he said he was “still working on it.” The bank continued to believe the loan was being used as promised.
That changed on October 12, 2022. McDermott met with a senior executive from Lender-1 and admitted that he was under SEC investigation and had used the loan funds to repay investors.
The disclosure connected his original misrepresentation to the subsequent transfers of money, forming the basis for the wire-fraud and money-laundering charges that followed.
When McDermott first applied for the loan, he represented to the bank that neither he nor his companies were under investigation by any government agency. That statement was false. At the time, the Securities and Exchange Commission had already opened a formal inquiry into his company, Secured Income Group’s one-hundred-million-dollar investment program.
The Backdrop
McDermott is the founder and chief executive of Secured Income Group, Inc., or SIG, a real-estate lending and investment firm headquartered in Tustin, California. Between July 2017 and January 2021, McDermott and SIG raised nearly $100 million from hundreds of investors across the country through an offering of “Secured Debentures.” The promise was straightforward: investor funds would be pooled to make short-term real-estate loans to home developers and flippers, each secured by a first-lien trust deed on the underlying property.
Marketing materials pitched the investment as safe, steady, and “secured against real estate.” The product, McDermott told investors, was “like a CD, but with better returns.” The offered interest ranged from 6 to 9 percent, depending on term length.
The Deception
In reality, the business model was already breaking down. While SIG originated real-estate loans, it also sold off tens of millions of dollars of those loans—and their security interests—to third-party note purchasers. Those buyers acquired both the notes and the income streams from the properties, leaving SIG with far less collateral than investors had been promised.
By late 2019, SIG owed investors roughly $61 million but owned only $21 million in loans. A year later, the company’s debt had grown to $86 million, while its loan portfolio had dwindled to $23 million—a collateral shortfall of more than 70 percent.
Despite that, McDermott and Porter continued to market the investment as fully secured. In May 2020, at McDermott’s direction, SIG sent investors a “Loan Portfolio Summary” claiming to hold 271 active loans totaling $76.5 million backed by $115 million in appraised collateral. Internal records later showed that more than $45 million of those loans had already been sold, and several listed as “performing” had been foreclosed.
The Collapse
By early 2021, SIG’s loan income could no longer sustain its investor payments. McDermott began liquidating assets and transferring funds from his other companies to meet obligations. He stopped taking new money but continued to reassure investors that their principal was secure.
The SEC filed its complaint in September 2022, alleging SIG’s outstanding collateral had been misrepresented, investor funds were misused, and securities were sold to unaccredited investors without registration.
At the time of the SEC filing, SIG still owed about $16 million in principal and $1.5 million in accrued interest.
The Connection
As the SEC probe intensified, McDermott sought a way to repay investors before enforcement could strike. In late 2020, he applied for and obtained a $10 million loan from Lender-1, misrepresenting that the money would finance acquisitions for Escrow Company-1 and Real Estate Company-1. In reality, the funds were immediately diverted to pay existing SIG investors and to mask the company’s shortfall.
The Fallout
McDermott now faces one count of wire fraud and one count of money laundering.