Jonathan D. Davey, 48, a hedge fund manager and CPA for a Ponzi scheme that stole $40 million from over 400 victims, including many in Ashe County, was convicted of investment fraud conspiracy charges by a federal jury in Charlotte Friday, according to U.S. Attorney for the Western District of North Carolina Anne M. Tompkins.
Davey, of Newark, Ohio, was charged in a February 2012 federal indictment with serving as an administrator of “numerous hedge funds” of the Black Diamond Ponzi scheme, with defrauding victims of $11 million with his own “Divine Circulation Services” hedge fund, and with tax evasion, according to an FBI press release.
Charges against Davey arose from a joint investigation of Black Diamond by the FBI and the IRS in cooperation with the U.S. Attorney’s Office. The investigation has also brought criminal charges against 10 co-conspirators, including Keith Franklin Simmons, 47, of West Jefferson, who was convicted and sentenced to 50 years in prison in May 2102 in connection with the scheme.
At trial, the government showed that by the end of the scheme, Davey and other hedge fund managers had less than $1 million total in their accounts, while account information published on a website for victims reflected over $120 million in supposed values, according to the FBI.
According to evidence presented in the trial, Davey established a network of shell companies to launder money and evade taxes on proceeds of the Ponzi scheme. An offshore shell company in Belize was used to funnel money to build Davey’s personal mansion in Ohio.
Davey was convicted of all four charges on the indictment following 45 minutes of jury deliberation.
According to the FBI, Davey faces: a maximum sentence of five years in prison for securities fraud conspiracy; a $250,000 fine and a maximum of 20 years in prison for wire fraud conspiracy; a $250,000 fine and a maximum of 20 years in prison for money laundering conspiracy; and a $250,000 fine and a maximum of five years in prison for tax evasion.
Davey was released on bond; no sentencing date has been set.
In addition to Davey and Simmons, nine other co-conspirators were listed in an FBI press release:
- Bryan Keith Coats, 52, of Clayton, N.C., pleaded guilty on Oct. 24, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Coats was sentenced to 15 years in prison on Nov. 16, 2012.
- Deanna Ray Salazar, 55, of Yucca Valley, Calif., pleaded guilty on Dec. 7, 2010, to conspiracy to commit securities fraud and tax evasion. Salazar was sentenced to 54 months in prison on May 23, 2012.
- Jeffrey M. Muyres, 37, of Matthews, N.C., pleaded guilty on May 17, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Muyres was sentenced to 23 months in prison on Jan. 18, 2012.
- Roy E. Scarboro, 48, of Archdale, N.C., pleaded guilty on Dec. 3, 2010, to securities fraud, money laundering, and making false statements to the FBI. Scarboro was sentenced to 26 months in prison on May 4, 2011.
- James D. Jordan, 49, of El Paso, Texas, pleaded guilty on Sept. 14, 2010, to conspiracy to commit securities fraud. Jordan was sentenced to 18 months in prison on June 29, 2011.
- Stephen D. Lacy, 53, of Pawleys Island, S.C., pled guilty on Dec. 9, 2010, to conspiracy to commit securities fraud. Lacy was sentenced to six months in prison on May 4, 2011.
- Chad A. Sloat, 34, of Kansas City, Mo., pleaded guilty on Oct. 17, 2012, to conspiracy to commit securities fraud and failure to file a tax return. Sloat is currently waiting to be sentenced.
- Jeffrey M. Toft, 50, of Oviedo, Fla., pleaded guilty on Nov. 26, 2012, to conspiracy to commit securities fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. Toft is currently waiting to be sentenced.
- Michael J. Murphy, 52, of Deep Haven, Mo., pleaded guilty on Jan. 22, 2013, to conspiracy to commit securities fraud. Murphy is currently waiting to be sentenced.