A federal court in North Carolina has entered a final judgment against adviser Richard W. Davis, finding him liable for disgorgement and prejudgment interest of $653,904 in connection with a scheme that defrauded 75 clients, taking $9.3 million of their investment funds.
In light of his 2018 conviction and sentence to a 90-month prison term in a parallel criminal case, the Securities and Exchange Commission, which filed a complaint against Davis in 2016, dismissed its claim for a civil penalty.
In its complaint, the SEC alleged that Davis, of Charlotte, North Carolina, told investors that he would invest their money in assets such as real estate or mineral rights. Instead, he used the money to engage in undisclosed transactions with companies he owned.
He then continued to misrepresent to investors that their investments were growing, despite actually suffering losses, the SEC said in a release. According to the complaint, Davis also misappropriated a large part of the money he raised from investors for his own personal use.
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
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"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
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