Florida Businessman Found Guilty of Conspiring to Defraud Investors
Over 100 Investors Lost More Than $13 Million in Scheme
ORLANDO, FLA. – Donovan G. Davis, Jr., 33, of Palm Bay, Fla., was found guilty by a jury today of federal charges stemming from an investment fraud scheme in which more than 100 investors lost over $13 million, announced Vincent H. Cohen, Jr., Acting U.S. Attorney for the District of Columbia, and James D. Robnett, Special Agent in Charge of the Tampa Field Office of IRS-Criminal Investigation.
Davis was found guilty 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. The jury trial began May 4, 2015, before the Honorable Carlos E. Mendoza of the U.S. District Court for the Middle District of Florida. After the verdicts were returned the judge ordered Davis to be detained pending his sentencing on Aug. 5, 2015.
Two co-defendants earlier pled guilty. Blayne S. Davis, 33, formerly of Naples, Fla., pled guilty in July 2014, to conspiracy to commit mail and wire fraud; he was later sentenced to a nine-year prison term and ordered to pay $13,215,874.75 in restitution. (The Davises are not related). Damien L. Bromfield, 38, of Ocoee, Fla., pled guilty in November 2013, to conspiracy to commit wire fraud and is awaiting sentencing.
“These families lost more than $13 million when they entrusted their hard-earned savings to an investment firm that lied about its performance,” said Acting U.S. Attorney Cohen. “With today’s guilty verdict, all three men responsible for this fraud are seeing the consequences of their crimes. Financial crimes don’t just create losses on paper; they cause lasting harm to real people. I commend the prosecutors from here in D.C. who held these criminals accountable for their deception in a Florida courthouse.”
“Today’s verdict holds this man accountable for his misuse of a position of trust within his investment corporation,” said Special Agent in Charge Robnett. “The Special Agents of IRS-Criminal Investigation, along with our law enforcement partners, are committed to unraveling complex financial transactions and money laundering schemes and bringing justice for the investors.”
According to the government’s evidence, Donovan Davis, Jr. 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. Blayne S. Davis was the director of trading, and Bromfield was the director of operations.
Blayne S. Davis and Bromfield formed Capital Blu in January 2007. In 2007 and 2008, according to the government’s evidence, 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 government’s evidence, 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 government’s evidence, the three partners knew that the CBM FX Fund had sustained significant trading losses, resulting in large losses for its investors. At or about that time, the men began defrauding investors by means of materially false and fraudulent pretenses, representations, and promises. These included, according to the government’s evidence, a series of misrepresentations about Capital Blu’s trading performance, the value of the fund, and the risks of the fund.
According to the government’s evidence, 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 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; the investors lost over $13 million.
This case was transferred from the Middle District of Florida to the U.S. Attorney’s Office for the District of Columbia and the Department of Justice, Criminal Division.
The case was 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, which resulted in a civil judgment against the defendants after a trial in 2011.
Assistance on the criminal case was provided by Paralegal Specialists Donna Galindo, Corinne Kleinman, and Heather Sales; 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. Paralegal Specialists Zayden Tethong and Elias Brockman of the U.S. Department of Justice, Criminal Division, also assisted at trial. 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 was prosecuted by Assistant U.S. Attorney Jonathan P. Hooks of the U.S. Attorney’s Office for the District of Columbia, who was designated as a Special Attorney in the Middle District of Florida, and Trial Attorneys David M. Fuhr and Ephraim (Fry) Wernick, of the U.S. Department of Justice, Criminal Division.