FLORIDA BUSINESSMAN PLEADS GUILTY TO CONSPIRING TO DEFRAUD INVESTORS Over 100 Investors Lost More Than $11 Million In Scheme
ORLANDO, FLA. –Blayne S. Davis, 33, formerly of Naples, Fla., pled guilty today to a federal charge stemming from an investment fraud scheme in which more than 100 investors lost over $11 million, announced U.S. Attorney Ronald C. Machen Jr. and James D. Robnett, Special Agent in Charge of the Tampa Field Office of IRS- Criminal Investigation.
Davis pled guilty in the U.S. District Court for the Middle District of Florida to a charge of conspiracy to commit mail and wire fraud. He is to be sentenced Oct. 9, 2014.
The charge carries a maximum of 20 years of imprisonment and financial penalties. The parties agreed that, under the federal sentencing guidelines, Davis faces a range of between 87 and 168 months in prison and a fine of between $12,500 and $175,000. He also will be required to pay restitution of $11,894,776 to the investors who lost money.
Davis has agreed to cooperate in the ongoing investigation. A co-defendant, Donovan G. Davis, Jr., 33, of Palm Bay, Fla., has pled not guilty and is awaiting trial in the case; he is not related to Blayne Davis. A third defendant, Damien L. Bromfield, 37, of Ocoee, Fla., pled guilty on Nov. 14, 2013, to conspiracy to commit wire fraud and is awaiting sentencing.
According to a Statement of Offense, signed by Blayne Davis as well as the government, and filed with the Court today, Blayne Davis was the director of trading for 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. Donovan Davis, Jr. was the managing member of Capital Blu, and Bromfield was the director of operations.
Blayne Davis and Bromfield formed Capital Blu in January 2007. In 2007, according to the statement of offense, Donovan Davis, Jr. solicited relatives, friends, and associates to invest in Capital Blu, resulting in substantial amounts being placed under the company’s management. Donovan Davis, Jr., became a managing member of Capital Blu in August 2007, working out of an office in Melbourne, Fla.
In or about September 2007, according to the statement of offense, the three men 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.
By January 2008, according to the statement of offense, the three partners knew that the CBM FX Fund sustained significant trading losses, resulting in large losses for its investors. At or about that time, the statement of offense states, the men began defrauding investors by means of materially false and fraudulent pretenses, representations, and promises. These included, according to the statement of offense, a series of misrepresentations about Capital Blu’s trading performance, the value of the fund, and the risks of the fund.
According to the statement of offense, the men conspired to post positive monthly returns to the CBM FX Fund’s investors from January through August of 2008, even though the fund and its investors had sustained net losses. In addition, the men diverted investors’ money from the fund to pay for Capital Blu’s operational expenses and personal expenses, including their salaries and payments for the use of a private airplane.
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, according to the statement of offense, investors had invested over $16 million into the CBM FX Fund; the investors had lost over $11 million.
This case was transferred to the U.S. Attorney’s Office for the District of Columbia from the Middle District of Florida.
The case is being investigated by a task force consisting of agents from the IRS- Criminal Investigation, the U.S. Secret Service, the Florida Department of Law Enforcement, and the Brevard County, Fla., Sherriff’s Office. Related civil litigation was pursued by the Commodity Futures Trading Commission.
Assistance on the criminal case was provided by Paralegal Specialists Donna Galindo and Corinne Kleinman; former Paralegal Specialist Diane Hayes; Legal Assistant Angela Lawrence; Forensic Accountant Crystal Boodoo; Information Technology Specialist Thomas (Ron) Royal; and Victim Witness Advocates Yvonne Bryant and Tasheeka Hawkins, all of the U.S. Attorney’s Office for the District of Columbia. Assistant U.S. Attorneys Catherine K. Connelly and Anthony Saler, of the Asset Forfeiture and Money Laundering Section of the U.S. Attorney’s Office for the District of Columbia, have assisted with guidance on asset forfeiture matters.
The case is being prosecuted by Assistant U.S. Attorneys Jonathan P. Hooks and Ephraim (Fry) Wernick of the U.S. Attorney’s Office for the District of Columbia, who are designated as Special Attorneys in the Middle District of Florida.