The SEC said Coughlin misappropriated investor money to pay personal expenses, fund unrelated business expenses, and made distributions to other investors in a classic Ponzi-scheme fashion.

To further the fraud, the defendant also posted false information to investors' online accounts to create the appearance that their deposits in the fake credit union were earning substantial daily investment returns, the SEC said.

On the credit union's website, investors were told their deposits were purportedly earning investment returns that averaged, during the January 2007 through December 2009 period, 0.471% each trading day, equating to an approximately 356% average annual rate of return.

According to the SEC complaint, however, the defendants did not actually make investments with the members' deposits sufficient to generate the returns they boasted. Coughlin and Oxford International Credit Union also falsely claimed that member accounts were insured by a private insurance company.

Beginning in December 2008, Coughlin began operating a successor to Oxford International Credit Union, called Oxford International Cooperative Union, which also boasted bogus investment returns on its website, Oxford Privacy Group, from its inception in late 2008 through December 2011, the SEC said.

The SEC's complaint alleged that Coughlin misappropriated at least $5.97 million and used investor money for illegitimate purposes, including $1.57 million for personal expenditures and $4.4 million to pay other investors who had requested withdrawals from their Oxford International Credit Union accounts. Coughlin also transferred money from Oxford International Credit Union's accounts to bank accounts he controlled in the names of two relief defendants, according to the SEC.

In late 2008 and 2009, Coughlin began to deny investors' requests for withdrawals from their accounts, the SEC said. To explain his refusal to allow investors to access their funds, Coughlin falsely claimed that the Internal Revenue Service and foreign tax authorities had frozen Oxford International Credit Union and Oxford International Cooperative Union's accounts, authorities said.

In response to an email from CU Times, the website's operators said it learned of Coughlin's arrest on April 11 and was awaiting correspondence from the Justice Department for more details on the case.