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SEC Secures $650K Disgorgement from Ex-FA After 90-Month Sentence

By Alex Padalka November 23, 2020

A North Carolina court has entered a final judgment against a former investment advisor, who will pay hundreds of thousands of dollars in disgorgement connected to a fraudulent scheme, the SEC says, adding that it is foregoing a civil penalty in light of the advisor’s lengthy prison sentence

The SEC charged Richard Davis Jr. in 2016 with defrauding at least 85 people, raising around $11.5 million from them through “the unregistered sale of securities in two unregistered hedge funds for which he acted as fund manager,” the regulator says in a litigation release published last week.

The SEC alleges that Davis told the investors that the money would be invested in assets such as real estate or mineral rights, but instead had the funds “engage in undisclosed transactions with companies that he owned.” Furthermore, Davis allegedly told investors that their investments were growing while they were actually suffering losses, while he misappropriated some of the money for personal use, the regulator says.

Last week, the U.S. District Court for the Western District of North Carolina ordered Davis to pay $653,904 in disgorgement and prejudgment interest, the SEC says, adding that it dismissed its claim for a civil penalty given Davis’s prison term.

In 2018, a federal judge sentenced Davis to 90 months in prison and two years of supervised release for securities fraud related to the investment funds he controlled and tax evasion, which cost around 75 victims $9.3 million, the U.S. Attorney’s Office for the Western District of North Carolina said at the time.

The SEC had already barred Davis in 2016 in connection to the alleged fraud.

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