David Blaine Welliver Sentenced in $1.7M Fraud Scheme

David Blaine Welliver, 56, of Buffalo, Minn., is going to prison for five years after admitting to one count of securities fraud in a brazen scheme that stripped investors of $1.725 million. Welliver, the CEO and CIO of Dblaine Capital, LLC, pleaded guilty on July 13, 2016, and was sentenced today before Senior U.S. District Judge Paul A. Magnuson in St. Paul, Minnesota.

Between October 2010 and May 2011, Welliver executed 27 separate transactions, borrowing $4 million from Lazy Deuce Capital Company, LLC, under the false pretense that the funds would finance a merger between Dblaine Capital and other mutual funds. Instead, he diverted over $500,000 of those funds to his personal accounts—lavishing the money on landscaping, interior decorating, land purchases adjacent to his home, a personal vehicle, and his son’s college tuition.

Welliver’s betrayal didn’t stop there. Between December 16, 2010, and April 15, 2011, he funneled $1.725 million from Dblaine Fund investors into Semita Partners LLC, a shell company controlled by principals of Lazy Deuce—the same firm funding his earlier loans. He knew full well that Semita had no operations and was nothing more than a paper entity built for deception.

On December 31, 2010, with redemptions mounting, Welliver liquidated nearly all of the Dblaine Fund’s stock holdings to cover obligations. After the fire sale, the fund’s only assets were worthless shares in Semita and a dwindling cash balance in a money market account—marking the collapse of investor trust and capital.

The investigation was a joint operation by the United States Postal Inspection Service, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation. The case was prosecuted by Assistant United States Attorneys Kimberly A. Svendsen and Benjamin F. Langner, who called the fraud a calculated dismantling of fiduciary duty.

Welliver now faces five years in federal prison, followed by three years of supervised release, and has been ordered to pay $2,161,079.83 in restitution. His fall from financial manager to felon underscores a familiar tale in the world of white-collar crime: when greed overpowers guardrails, ordinary investors pay the price.