Through a website, Coughlin attempted to fool investors by claiming the credit union was insured and even posted an image of a check to the CUNA for $56,200 to show that the insurance premium had been paid. In reality, however, the check was never sent to CUNA, no insurance was ever obtained and the credit union was never managed or operated like a true credit union, according to court documents.

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.

Coughlin 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 fake 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.

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, 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.

This is the second case involving a fake credit union this month.

A U.S. District Judge in Denver ordered the founder of a fake credit union to pay more than $1 million in civil penalties and as restitution for bilking members out of $532,000 in bogus certificates.

According to court documents, Judge John L. Kane issued his final judgment Oct. 8 against Stanley B. McDuffie of Denver, who founded Her Majesty's Credit Union in the Virgin Islands and sold $532,591 in CDs to four members. Kane ordered McDuffie to pay that total amount and an additional $532,591 in a civil penalty to the SEC.

Although McDuffie obtained a basic license to open HMCU in the Virgin Islands in 2007, the credit union was not chartered by the NCUA or by any U.S. state, and was not subject to regulations, the SEC charged in its civil lawsuit filed against McDuffie in November 2012.