SEC halts fraud by Ohio-based hedge fund manager
The Securities and Exchange Commission has filed an emergency action charging Anthony J Davian and his Richfield, Ohio-based asset management firm with defrauding investors in hedge funds they manage.
A federal district court granted the SEC's motion for emergency relief, halting the fraud.
The SEC alleges that since 2011 Davian, a 34-year old resident of Copley, Ohio, has raised more than USD1.5m from investors by promoting Davian Capital Advisors as a highly successful investment management firm that manages a portfolio of profitable hedge funds. The SEC further alleges that Davian and Davian Capital misappropriated at least USD1m in investor proceeds and used the funds to pay for personal expenses such as the purchase of a luxury home and automobile for Davian.
According to the SEC's complaint, filed in federal district court, since 2011 Davian has raised at least USD1.5m from investors in several private funds managed by Davian Capital. Davian provided investors with marketing materials touting the funds' supposedly high returns and profitable trading strategies. The returns and profits described in the marketing materials were fictitious. Davian misappropriated most of the money received from investors and used the investors' funds to pay for personal expenses. For example, Davian pressured three individuals to invest USD225,000 into his private funds, telling them that if they acted fast he would give them a break on his firm's management fees. Immediately upon receiving the investors' proceeds on 5 July 2013, Davian used the funds to pay for the construction of his residence.
The SEC filed an action against Davian and Davian Capital in federal district court in Akron, Ohio on 13 August, alleging that they violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Commission requested emergency relief, including a temporary restraining order and asset freeze. That same day, the Court granted the emergency relief requested by the SEC. In addition to emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains and financial penalties from Davian and Davian Capital.
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