On March 18, 2010, the U. S. Securities and Exchange Commission charged a South Carolina-based attorney and a cohort with securities fraud for bilking investors in a high-yield investment scheme that promised rates of return as high as 4,900 percent in just two months.
The SEC alleges that lawyer M. Mark McAdams of Myrtle Beach, S.C., and R. Dane Freeman of Flat Rock, N.C., told investors that they would generate the high returns through their firm – Global Holdings LLC – by buying bonds or notes directly from issuers at a discount and then quickly reselling them for a profit on international trading platforms.
According to the SEC’s complaint, McAdams used the letterhead and e-mail system of the law firm where he worked to communicate with investors and conduct Global Holdings business, without the firm’s knowledge. Global Holdings never purchased or sold bonds, and investors never received the promised profits. Some investor money was diverted to pay Freeman’s family and friends as well as a personal debt he owed.
The SEC’s complaint alleges that McAdams and Freeman raised more than $3.5 million from approximately 35 investors through joint venture agreements in which they represented that Global Holdings would use investor funds to buy and sell bonds or notes and trade them overseas to earn profits. Some of the joint venture agreements represented that investors who invested $20,000 would receive $1 million after 60 days, a return of 4,900 percent. Global Holdings never made these payments to investors.
The SEC alleges that McAdams and Freeman misrepresented the success of their purported trading program. According to the SEC’s complaint, McAdams misled at least one potential investor by falsely claiming that Global Holdings had already participated in hundreds of transactions that produced hundreds of millions of dollars for dozens of investors. Freeman told another potential investor that members of Global Holdings had invested $2 million of their own funds, made at least $200 million, and distributed $50 million to themselves while reinvesting the rest. To substantiate his false claim that he received a substantial distribution himself, Freeman sent the potential investor a document showing that Freeman had $11 million in a trust account that represented his share of the proceeds. In reality, the trust account was established by Freeman’s parents, did not contain any proceeds from the Global Holdings program, and had an actual of value of $1.34 million instead of the $11 million that Freeman purported to show in the document.
McAdams and Freeman are accused of violating various anti-fraud provisions of the federal securities laws.