News Column

3 more sentenced in $40 million 'Black Diamond' investment fraud

September 4, 2014

By Michael Gordon, The Charlotte Observer

Sept. 04--A federal judge in Charlotte this week sent three more financiers to prison, all linked to a massive Ponzi scheme that devoured life savings across Western North Carolina.

Chad Sloat, Michael Murphy and Jeffrey Toft were hedge fund managers for the $40 million "Black Diamond" investment fraud, which prosecutors said attracted 400 victims. Almost a fourth of those were 75 or older.

On Wednesday, U.S. District Judge Bob Conrad handed out punishment to three of Simmons' lieutenants:

--Sloat, 36, of Kansas City, Mo., was sentenced to 77 months and will pay restitution of $3.75 million to victims and $93,727 to the Internal Revenue Service.

--Murphy, 54, of Deep Haven, Minn., got 48 months and will pay $2.5 million in restitution.

--Toft, 51, of Sioux Falls, S.D., will serve 66 months and pay $2.2 million to victims.

All face two years of supervised release after their prison terms.

A fourth Black Diamond defendant, Jonathan Davey, 50, of Newark, N.J., is awaiting sentencing.

In announcing punishment, Conrad said the greed of the defendants led to the financial ruin of vulnerable and elderly investors.

In spearheading the scheme, Simmons, a self-styled Christian who quoted the Bible, promised customers returns of up to 137 percent if they would invest their money in his foreign currency trading program. Instead, he siphoned off millions to underwrite a lifestyle that included a mountaintop estate, private jets and pay-for-sex trysts in a series of condominiums.

In doing so, he left his clients in financial ruin.

"I can't remember another case that involved such devastating, life-wrecking ... greed," Conrad told him at sentencing.

Prosecutors say Sloat, Murphy and Toft played significant roles. From 2007 to 2010, they lured in investors with claims that they operated legitimate hedge funds and had done due diligence on Black Diamond.

When Black Diamond began to collapse in 2009, the three created a new Ponzi scheme built on bank accounts run by Davey to move money around, keep investors at bay with occasional payments, while siphoning off chunks of money for themselves.

Sloat, Murphy and Toft pleaded guilty in 2012 and 2013 to securities fraud and/or wire fraud and money laundering.

A jury convicted Davey of tax evasion and conspiracy to commit securities fraud, money laundering and wire fraud.


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Source: Charlotte Observer (NC)

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