SEC Claims Lawyer Ran $3.5 Million Scam

FLORENCE, S.C. (CN) - M. Mark McAdams, a former partner with one of South Carolina's most prestigious law firms, collaborated with a North Carolina man to defraud dozens of investors of $3.5 million, the SEC says in Federal Court. McAdams and his partner, R. Dane Freeman, promised returns of as much as 4,900 percent in only 2 months, the SEC says.

McAdams handled civil litigation and construction law at the McNair Law Firm before starting his own firm in 2008. The SEC claims he used McNair's email and letterhead to lure investors to his high-yield scam, which allegedly would generate the astonishing returns from government bonds and notes.

The SEC adds that no time did the McNair Law Firm know that McAdams was exploiting his connection with the firm to carry out the scheme in which he promised that Global Holdings LLC or an unnamed German entity would generate gigantic returns by trading in AA & AAA rated bonds and/or medium term notes.

McAdams and Freeman, of Flatrock, N.C., never bought any bonds and notes, prosecutors said. Freeman allegedly funneled the money to his family, to a colleague's girlfriend, to pay his own debts and to "other investors," to keep the Ponzi scheme going.

Although McAdams used his connection to the McNair Law Firm to run the scam, it was carried out in the name of "Global Holdings LLC," the SEC says. The agency claims that McAdams' activities at Global Holdings led to his resignation from McNair and the subsequent founding of his own practice.

Freeman had been associated with several broker dealers and investment advisers between 1997 and 2005, but had resigned or was terminated from many of these positions "for reasons such as failing to pay a debit balance, failing to comply with a policy regarding borrowing money from a customer, or failing to attend a required compliance seminar," the SEC says.

In 2004, Freeman opened an account into which he and McAdams directed investors to wire money to purchase bonds and/or medium term notes. The SEC complaint, however, focuses on the first nine months of 2008.

McAdams and Freeman also are accused to lying to investors by saying that Global Holdings would invest $3 million on its own money in the bonds, and had already earned hundreds of millions of dollars by doing so.

Global Holdings ceased raising money in September 2008 and was dissolved in October 2008, the SEC said.

The SEC seeks injunctions, disgorgement and civil penalties.

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