The Securities and Exchange Commission charged Secured Income Group, Inc., its owner and president, Max McDermott, and its investor relations representative, Stacey Porter, with investment fraud tied to their $100 million “Secured Debentures” offering between July 2017 and January 2021.
The SEC’s complaint alleges that Secured Income, at McDermott’s direction, claimed to investors that it would pool their money to make real estate loans secured by first lien positions on the underlying properties and that their investments would be secured by this real estate.
According to the SEC’s complaint, Secured Income and McDermott departed from the company’s business model and in doing so misrepresented material aspects of the investment.
The complaint also alleges that though Secured Group did originate real estate loans, it also sold off tens of millions of dollars of its loans along with the corresponding security interests. As a consequence, the outstanding principal value of Secured Group’s real estate loan collateral has at all points in time been substantially less than what it owed to its investors.
The complaint reads, “McDermott has been liquidating assets and using money from his other businesses to pay back investors since early 2021. Upon information and belief, Secured Income Group still owes its investors approximately $16 million in principal and $1.5 in accrued interest.”
Without admitting or denying the complaint’s allegations, Secured Group and McDermott have consented to the entry of judgments that press them from violating the charged provisions, and that impose an officer and director bar against McDermott.
Founded in 1996, Secured Income Group is headquartered in Orange County, California and is not registered with the SEC.