Dozens of Investors Lost More Than $13 Million in Scheme
A Florida businessman was sentenced today to 17 years in prison for his role in an investment fraud scheme resulting in over $13 million in losses to dozens of investors.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia and Special Agent in Charge Kimberly A. Lappin of the IRS-Criminal Investigation’s Tampa Field Office made the announcement.
Donovan G. Davis Jr., 34, of Palm Bay, Florida, was found guilty by a jury on May 14, 2015, of one count of conspiracy to commit mail/wire fraud, one count of mail fraud, six counts of wire fraud and eight counts of money laundering. He was sentenced by U.S. District Judge Carlos E. Mendoza of the Middle District of Florida, who ordered him to pay $10,520,005 in restitution jointly and severally with his co-defendants.
“Donovan Davis Jr. and his co-conspirators lied to persuade victims to invest their retirement savings and children’s college funds, and then concealed the investment fund’s extreme losses so that the victims would stay invested,” said Assistant Attorney General Caldwell. “The investors lost everything, while Davis and others running the scam looted the fund to pay their own six-figure salaries, purchase luxury cars and travel in private planes. This sentence will help hold Davis accountable for his crimes, but the investors he deceived will suffer for decades because of his greed and deceit.”
“Dozens of investors and their families lost millions of dollars because they put their trust in an investment firm that lied about its performance,” said Acting U.S. Attorney Cohen. “The deception of Donovan Davis Jr. and the others involved in this scheme caused great personal and financial harm to people, including many who lost their retirement savings. Today’s sentence reflects the seriousness of the defendant’s greedy, deceptive conduct and underscores our commitment to prosecuting those who commit financial crimes. I commend the prosecutors from here in D.C. who held these criminals accountable for their deception in a Florida courthouse.”
“Today’s sentencing demonstrates how federal law enforcement will band together to help put an end to the criminal behavior of those who prey on investors to unjustly enrich themselves,” said Special Agent in Charge Lappin. “IRS Criminal investigation and our law enforcement partners will relentlessly pursue those who mastermind and perpetrate investment fraud schemes.”
According to evidence presented at trial, Davis was the managing member of Capital Blu Management LLC, a Florida-based corporation that purported to offer investment and managed account services for investors in the off-exchange foreign currency, or “forex,” marketplace. In 2007 and 2008, Davis solicited relatives, friends and associates to invest in Capital Blu.
In or about September 2007, according to evidence presented at trial, Davis and his co-conspirators formed the CBM FX Fund LP, which pooled investors’ money into a common fund to be traded by Capital Blu Management. Many of Capital Blu’s managed-account investors transferred their investments into the CBM FX Fund.
According to the evidence presented at trial, CBM FX Fund had sustained significant trading losses, resulting in large losses for its investors. Nevertheless, the evidence demonstrated that Davis and his co-conspirators made a series of misrepresentations to the investors about Capital Blu’s trading performance, the value of the fund and the risks of the fund.
For example, according to the evidence presented at trial, the Davis and his co-conspirators informed CBM FX Fund’s investors of positive monthly returns from January through August of 2008, even though the fund and its investors had sustained net losses of millions of dollars. In addition, they diverted investors’ money from the fund to pay for Capital Blu’s operational expenses and personal expenses, including their own six-figure salaries and payments for the use of private airplanes and luxury cars.
In or about September 2008, the National Futures Association, an independent self-regulatory organization that oversees commodities and futures trading in the United States, conducted a surprise audit of Capital Blu and suspended its operations. As of September 2008, investors had invested over $16.9 million into the CBM FX Fund and lost over $13 million.
Co-defendant Blayne S. Davis (no relation to Donovan Davis Jr.), 34, formerly of Naples, Florida, pleaded guilty in July 2014 to conspiracy to commit mail and wire fraud, and was sentenced to nine years in prison and ordered to pay $13,215,874 in restitution. Co-defendant Damien L. Bromfield, 39, of Ocoee, Florida, pleaded guilty in November 2013 to conspiracy to commit wire fraud and is awaiting sentencing.
The case was investigated by a task force consisting of agents from the Internal Revenue Service-Criminal Investigation; U.S. Secret Service; Florida Department of Law Enforcement; and Brevard County, Florida, Sherriff’s Office. Attorneys, agents and accountants from the U.S. Commodity Futures Trading Commission (CFTC), National Futures Association, Bureau of Prisons and U.S. Immigration and Customs Enforcement also provided assistance to the investigation. A related civil litigation was pursued by the CFTC, which resulted in a civil judgment against the defendants after a trial in 2011.
The case was prosecuted by Trial Attorneys David M. Fuhr and Ephraim Wernick of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jonathan P. Hooks of the District of Columbia. Assistant U.S. Attorneys Catherine K. Connelly and Anthony Saler of the District of Columbia provided invaluable assistance on asset forfeiture matters.