Secured Income Group Investors May Be Victims of Alleged $100M Investment Fraud
If you are someone who invested in Secured Income Group, you may be reeling from the news that in September 2022, the US Securities and Exchange Commission (SEC) filed civil charges accusing the real estate investment company, its owner/President Max McDermott, and investor relations representative Stacey Porter with running an alleged $100M offering fraud. $99.9M of “Secured Debentures” were reportedly offered to investors, including many non-accredited investors.
Secured Debentures were touted as safe, “CD-like” even, only with a higher yield. Secured Income Group claimed that it would hold the loans it made, as well as corresponding security interests while collecting income from them. It was from this income that investors were told to expect 6% to 9% in interest rate payments. Instead, many of them have suffered significant investment losses.
The SEC contends that Secured Income Group promised investors it would pool their funds to create real estate loans that were secured by first-lien positions on underlying properties. The company reportedly assured them that real estate would keep their investments secure. Instead, contends the commission, Secured Income Group allegedly made key misrepresentations about this investment and did not abide by its business plan.
Although the real estate loans originated, the company also allegedly sold off tens of millions of dollars of loans in addition to corresponding security interests. As a result, said the SEC, the company’s real estate loan collateral now has an outstanding principal value that is purportedly significantly lower than what investors are owed—perhaps even as low as up to 70% of the amount owed to them.
The SEC claims that McDermott has been using funds from his other businesses and liquidating assets since 2021 to repay investors. At the time of the regulator’s complaint, investors may have been owed about $16M in principal and $1.5M in accrued interest.
What Should You Do If You Suffered Investor Losses in Secured Income Group?
It is important that you contact our knowledgeable alternative investment loss attorneys so that we can help you explore your legal options. If your financial advisor sold you Secured Debentures, you may be able to file a Financial Industry Regulatory Authority (FINRA) lawsuit against your broker-dealer for damages.
These Secured Debentures should have only been sold to accredited investors that met certain income level thresholds or qualified for specific exemptions. This does not describe the majority of unsophisticated/inexperienced investors, conservative retirees, or senior investors. If you were an unaccredited investor whose broker marketed Secured Income Group to you then they could be held liable for making an unsuitable investment recommendation to you.
Also, brokerage firms are required to conduct the necessary due diligence before recommending any kind of investment to a customer. They also must ensure that no misrepresentations or omissions are made when promoting any investment opportunity to a client. Due diligence failures are one of the most common reasons why FINRA lawsuits are filed by customers against their broker-dealers.
Working With Knowledgeable Alternative Investment Loss Attorneys
An alternative investment is a financial asset that doesn’t fall into the usual, more traditional investment categories, such as bonds, stocks, and cash. Real estate investments are alternative investments. They can be very risky and illiquid, which is why most of them are held by accredited, high-net-worth individual investors and institutional investors.
Shepherd Smith Edwards and Kantas Partner and Alternative Investment Loss Lawyer Sam Edwards:
Often, victims of alleged investment scams may find it challenging, even impossible, to recover their losses directly from the company involved. However, you may be able to go through FINRA arbitration and go after the broker-dealer who got you involved in this supposed investment opportunity, to begin with. Even if your brokerage firm was unaware that they were selling you allegedly fraudulent investments, you may still be able to file a FINRA lawsuit against them.
For over 30 years, our knowledgeable brokerage firm Alternative Investment Loss Lawyer teams have been fighting for investors. We have collectively recovered many millions of dollars for thousands of investors.