Two Florida Businessmen Indicted On Federal Charges Of Conspiring To Defraud InvestorsOver 100 Investors Lost More Than $11 Million In Scheme
ORLANDO, FLA. – Donovan G. Davis, Jr., and Blayne S. Davis, both 32, have been indicted on federal charges in a Florida-based investment fraud scheme that led to more than $11 million in losses for over 100 investors, U.S. Attorney Ronald C. Machen Jr. and James D. Robnett, Special Agent in Charge of the Tampa Field Office of IRS- Criminal Investigation announced today.
The indictments, returned on Feb. 26, 2014 by a grand jury in the Middle District of Florida, charge the defendants with one count of conspiracy, five counts of mail fraud, seven counts of wire fraud, and eight counts of money laundering. Donovan Davis, Jr. also is charged individually with five counts of wire fraud and one count of money laundering. The indictment includes a forfeiture allegation seeking a money judgment representing the defendants’ proceeds from the scheme. The defendants are not related.
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. Under his plea agreement, Bromfield must pay between $6,752,000 and $8,541,102 in restitution.
According to the indictment, Blayne Davis, of Naples, Fla., 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., of Palm Bay, Fla., was the managing member of Capital Blu, and Bromfield was the director of operations.
“These Florida men have been charged with lying to investors while gambling away $11 million of their victims’ hard-earned savings,” said U.S. Attorney Machen. “According to the indictment, these businessmen had been deceiving investors into believing that their money was growing, when in fact their life savings were disappearing. The defendants allegedly took money for themselves and for use of a private plane while they were hiding massive losses from their investors. This indictment signals our commitment to protecting innocent investors from fraud and to pursuing those who undermine confidence in our financial markets.”
“The indictment of these two executives alleges the misuse of their positions of trust within their investment corporation,” said Special Agent in Charge Robnett. “The Special Agents of IRS-Criminal Investigation are committed to unraveling complex financial transactions and money laundering schemes and bringing justice for the investors.”
Blayne Davis and Bromfield formed Capital Blu in January 2007. In 2007, according to the indictment, 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 indictment, 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 indictment, 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 indictment alleges, the men began defrauding investors by means of materially false and fraudulent pretenses, representations, and promises. These included, according to the indictment, a series of misrepresentations about Capital Blu’s trading performance, the value of the fund, and the risks of the fund.
The men allegedly 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 allegedly 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 indictment, investors had invested over $16 million into the CBM FX Fund; the investors had lost over $11 million.
An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until, and unless, proven guilty.
This case was transferred to the U.S. Attorney’s Office for the District of Columbia from the Middle District of Florida. The investigation is continuing.
This 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.14-048