U.S. Court convicts Simmons' co-conspirator
Last modified: Feb. 12, 2013
An administrator of numerous illegitimate hedge funds related to the Black Diamond ponzi scheme was convicted on Friday, Feb. 8, in U.S. District Court on investment fraud conspiracy charges.
Jonathan D. Davey, 48, a CPA of Newark, Ohio, becomes the 11th co-defendant convicted in the Black Diamond case.
Black Diamond Capital Solutions was a Jefferson-based financial group that bilked $40 million from 400 investors nationwide.
Davey was charged in February 2012 with soliciting more than $11 million from victims with his own hedge fund, “Divine Circulation Services,” and tax evasion, according to federal documents.
According to trial testimony, Davey lied to collect the money from victims mainly in North Carolina, Virginia and Ohio for his hedge fund by claiming that he had done due diligence on Black Diamond and was operating a legitimate fund with significant safeguards. In reality, neither was true.
As BDCS began to collapse, Davey and other hedge fund managers started a derivative ponzi scheme using a cash account that he controlled.
Court documents state Davey and his co-conspirators collected more than $5 million from new investors for the cash account and used the new money to make the ponzi payments to old investors.
Floating money in this fashion is essential to any ponzi-style scheme.
In addition, Davey controlled most funds and wires for the scheme, and published a website for victims that reflected false returns.
Davey also used an elaborate network of shell companies to evade taxes and commit money laundering with the proceeds of the scheme, said court documents.
He also used an offshore shell company in Belize to funnel money to build a mansion in Ohio.
Keith Franklin Simmons, the former controller of BDCS in Jefferson, was sentenced to 50 years in prison May 2012 for his connection to a ponzi scheme.
At the time, Simmons’ case was billed as the “worse financial crime in recent memory” within this region of U.S. District Court.
Federal documents said Simmons, 47, lulled investors, many of which were elderly, between April 2007 and December 2009 by telling them he would invest their money into a foreign currency exchange platform, which never happened.
He made false claims to investors that Black Diamond, the investment group he used to commit the money laundering, was generating profits of more than 48 percent annually in the foreign currency exchange market.
A federal investigation revealed Simmons had used the diverted funds to purchase a wide swath of real estate property around Ashe County to fund his personal lifestyle. He has since been forced to forfeit all the property.