Timeline:
October 2007: Davey incorporates Divine Circulation Services, LTD (DCS) in Belize, regulatory complies with the Securities & Exchange Commission (SEC), and submits Blue Sky Filings in several states. Davey also completes the termination of all his Registered Investment Advisor (RIA) contracts, effectively ceasing his RIA practice. However, Davey retains his RIA license.
December 2007: After investing in Mexbank and Audience Alliance, DCS makes its initial investment with Black Diamond (BD) of $200,000 after signing an investment agreement with the three partners of BD: Keith Simmons, Deanna Salazar, and Brian Coats (see Defense Trial Exhibit #25, not attached herein).
January 2008: Davey meets with Keith Simmons, BD’s President, and Amanda Watson Blevins, BD’s VP of Corporate Services in Arizona. Simmons and Blevins further explain BD’s history and operation. Blevins, in particular, emphasizes BD’s vibrant loan program and investor relations. Two years later, Davey will learn that no such program ever existed (see Exhibit #33).
October 2008: DCS withdraws approximately $3.3 million of its principle from BD and combines this account with funds currently sitting in DCS’s cash account in order to make a $4 million investment in Amkel Capital in England. Although substantial gains are purportedly sitting in DCS’s account at BD, DCS’s total cash withdrawals from BD do not exceed their total cash deposits to BD.
October 2008: Around this time, Davey was approached about providing third party administrative services to some of his co-defendants. Davey drew up a contract which detailed the responsibilities of Davey, the hedge fund manager, and the hedge fund itself. Davey’s fee was based on the value of the fund’s assets. Davey’s services included transferring funds, monthly reconciliation of third party statements (i.e., banks, brokerage accounts, etc.), allocation of earnings per the partnership agreement, monthly reporting of reconciled activity, tax preparation, and record keeping. (see Exhibit #79).
January 2009: Monique Martens, an investor in BD but not a client of Davey or his co-defendants, withdraws $1 million from BD and Davey wires the full amount to Amkel Capital in England as a professional courtesy.
February 2009: Davey receives a phone call from Ken Hampton, an investigator in Chicago with the Commodities Futures Trading Commission (CFTC), inquiring about DCS’s investment in Mexbank. When the investigation implies that Mexbank has been involved in fraud, Davey readily volunteers to assist in any way possible. The cordial conversation lasts about 20 minutes and the investigator thanks Davey for his time and states that he will request more information later (see Exhibit #1).
February 2009: All the co-defendants, except Salazar, meet in Arizona for general discussions on investments. During a meeting Simmons informs the group that he will be closing down the successful BD investment platform to pursue other interests. Although the process will take several months, Simmons states that all investments will continue to be invested and accumulate earnings until everyone has been cashed out. Everyone is encouraged to increase the liquidity in their cash account to handle upcoming tax season withdrawal requests. All co-defendants leave the conference in high spirits.
April 2009: Davey becomes aware of an investigation into BD by a federal regulator but Simmons downplays the event as a minor issue with an investor in Florida. In fact, the CFTC has been investigating BD and receives a written confession from Simmons stating that BD is, in essence, a fraud because it has never invested in foreign currency despite receiving approximately $35 million in deposits for that specific purpose. In the most poignant display of complete negligence, incompetence, and malfeasance, the CFTC takes absolutely no action against Simmons or BD. The CFTC, which is authorized and tasked with protecting the public from this exact type of fraud, does not notify Simmon’s bank, local authorities, Davey, other current investors, or future investors. The CFTC allows Simmons to continue his fraudulent operation uninterrupted. From this time forward, the CFTC’s actions are unjustifiable, malicious, corrupt, intentional, and reckless (see Exhibits #2, #3, and #4).