Orlando, Florida – Donovan Davis Jr. and three associates have been ordered to pay over $2.4 million in restitution and hefty civil penalties for operating a fraudulent commodity pool, the U.S. Commodity Futures Trading Commission (CFTC) announced June 15, 2011. The case, stemming from a trial concluded February 3, 2011, reveals a scheme to defraud investors of approximately $17 million.
Judge John Antoon II of the U.S. District Court for the Middle District of Florida issued the order against Donovan Davis Jr. of Palm Bay, Fla., Damien Bromfield of Ocoee, Fla., Blayne Davis of Naples, Fla., and their company, Capital Blu Management, LLC, based in Melbourne, Fla. Also named in the judgment was DD International Holdings, LLC (DDIH) of Palm Bay, Fla.
The CFTC initially charged the defendants in April 2009 with running a fraudulent commodity pool that solicited funds from roughly 100 investors under the pretense of investing in off-exchange foreign currency futures. Evidence presented at trial showed that Donovan Davis Jr., as Director of Corporate Affairs for Capital Blu, and Bromfield, the Director of Operations, were key figures in the scheme.
Beginning in August 2007, Capital Blu’s CBM FX Fund, LP collected approximately $17 million from investors. When the fund suffered losses of $1.8 million in January 2008, Donovan Davis Jr. allegedly directed the Controller to falsely report a 1.6 percent gain. This marked the beginning of a pattern of deceit. Bromfield, Donovan Davis Jr., and Blayne Davis, the Director of Trading, then conspired to cover the losses by attracting new investors, engaging in aggressive trading, and fabricating account statements.
The scheme further involved diverting funds from the CBM FX Fund to cover Capital Blu’s operating expenses, including the purchase and maintenance of a private jet. Despite millions in losses sustained in August 2008, Bromfield and Donovan Davis Jr. continued to issue falsified statements reporting a 0.16 percent profit and informed investors their funds were locked for four months. Throughout this period, the principals continued to draw monthly salaries of $15,000 each from the investor funds.
Judge Antoon ordered Donovan Davis Jr. and DDIH, jointly and severally, to pay $4,927,184.24 in civil penalties, in addition to the $2,463,592.12 restitution. Bromfield and Blayne Davis were each ordered to pay the same penalty amount. All defendants are permanently barred from engaging in any commodity-related activities or registering with the CFTC.
Because Blayne Davis and the companies did not respond to the initial complaint, default judgments were entered against them.
Source: CFTC.gov
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