SEC Charges McKinley Mortgage with Scheme to Defraud – Posted by Brenda Hamilton

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One March 22nd the Securities and Exchange Commission announced settled charges against McKinley Mortgage, the operators of a real estate investment business who engaged in a years-long scheme to bilk hundreds of investors – including many retail investors – out of millions of dollars. As a result of the settlement, Defendants will be ordered to return all ill-gotten funds to investors.

The SEC alleges that from 2012 through 2016, Tobias Preston, his brother, Charles Preston, and his son, Caleb Preston, along with their investment advisory entity, McKinley Mortgage Co. LLC (McKinley), raised more than $66 million from approximately 300 investors, most of whom were retail investors, by falsely stating that investments in their fund, Alaska Financial Company III, LLC (AFC III), were secure and that AFC III earned high returns from its portfolio. In reality, AFC III has been insolvent and unable to generate sufficient revenue to meet its interest obligations for years. According to the SEC, although a portion of the funds raised by McKinley Mortgage were invested as promised to investors. However, Tobias Preston misused more than $17 million to fund personal businesses and to pay for personal expenses, and McKinley Mortgage misused an additional $14 million to pay for its own operational expenses. The SEC also alleges that Charles Preston, Caleb Preston, and Accounting Manager Laura Sanford helped hide the fraud by preparing or distributing investor materials with false information and concealing information from AFC III’s auditors.

The SEC’s complaint charges violations of the anti-fraud and registration provisions of the federal securities laws. Without admitting or denying the SEC’s allegations, all defendants agreed to permanent injunctions against future violations. McKinley Mortgage Co. LLC, Tobias Preston, Charles Preston, and Caleb Preston consented to entry of a final judgment permanently enjoining them from future violations of Sections 5 and 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Caleb Preston also consented to a permanent injunction against future violations of Section 15(a) of the Exchange Act; affiliated entity McKinley Mortgage Company, LLC consented to a permanent injunction against future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and Laura Sanford consented to a permanent injunction against future violations of Section 17(a) of the Securities Act.

The Prestons and McKinley agreed to repay the almost $30 million they improperly received that has not already been returned to AFC III and to the appointment of new management at McKinley, AFC III, and their affiliates. Tobias Preston also will be ordered to return assets he improperly acquired and to pay a $2.5 million penalty. Charles Preston and Caleb Preston agreed to pay penalties of $425,000 and $150,000, respectively. The settlements are subject to court approval.

The SEC’s investigation was conducted by John P. Mogg and Crystal F. Boodoo, and supervised by Steven D. Buchholz and Erin E. Schneider of the San Francisco office. The SEC appreciates the assistance of the Alaska Department of Commerce, Community, and Economic Development – Division of Banking and Securities.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855