100 victims bilked out of $19M in Charlotte investment scheme

Updated: Dec. 17, 2016 at 12:06 PM EST
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CHARLOTTE, NC (Joe Marusak/The Charlotte Observer) - A Charlotte investment adviser is accused of bilking 100 victims out of $19 million, including local professional athletes and members of his church.

A federal grand jury returned a criminal indictment on Tuesday charging Richard Wyatt Davis Jr., 40, with one count of wire fraud, two counts of securities fraud and three counts of tax evasion. The indictment was unsealed Thursday after police arrested Davis. He was in the Mecklenburg County jail Thursday night on a federal detainer.

Davis is accused of spending the money on vacation homes, vehicles, nannies, a personal chef and a groundskeeper. He also used the money to pay his and his then-wife's personal credit cards and his mortgage, according to the indictment.

Davis is accused of targeting investors in and around Charlotte. He also spoke at events for "preppers" and survivalists, thereby targeting victim-investors who feared the stock market and the banking system, prosecutors said.

The victims' names were not disclosed Thursday.

According to the indictment, Davis scammed people from 2005 through this year by getting them to invest in fraudulent investment funds he controlled. The indictment said he made false misrepresentations regarding his credentials, including his educational background and about being a registered financial consultant

Davis assured his victims that his fraudulent investment vehicles were low-risk and involved real estate, precious metals and natural resources, according to the indictment. He touted the investments as a safe alternative to the stock market and falsely assured his victims that their investments were growing in value.

For example, Davis falsely claimed that transactions of one of his funds had received an average net internal rate of return of 32 percent, according to the indictment.

Because of such assurances, prosecutors said, Davis's investors frequently rolled over their entire retirement savings into the entities he controlled.

In reality, Davis invested none of the victims' money, the indictment said. He instead transferred most of the victims' money to other entities he controlled, and used some of the money to make Ponzi-style payments to earlier investors to conceal and prolong the scheme., according to the indictment. Other money went to support his personal lifestyle, prosecutors said.

To avoid fulfilling victim withdrawals requests, Davis gave numerous excuses, including that the victims' money was unavailable because the funds were tied up in investments with specific maturity periods, according to the indictment.

Prosecutors said he also falsely advised victims they needed to invest additional funds to secure the return to their original investment. Davis was also frequently evasive or failed to report to investors' inquiries about the status of their investments, and even threatened to discontinue managing the investments if investors asked for too much information, according to prosecutors.

The indictment also said Davis filed false tax returns for 2009 and 2011 that reflected negative total income. He also failed to file individual income tax returns for 2010 and 2012, according to the indictment. During the same time, Davis submitted various financial statements to banks and courts claiming his annual income was anywhere between $385,000 and upwards of $1.5 million, prosecutors said.

Davis had his initial appearance Thursday before U.S. Magistrate Judge David Keesler. Davis was ordered to remain in custody until his detention hearing on Tuesday. Attempts by the Observer to reach his federal public defender, Peter Adolf, were unsuccessful.

The wire fraud charge carries up to 30 years and a $1 million fine. The securities fraud charge carries up to 20 years and a $250,000 fine per count. The maximum prison term for the tax evasion charge is five years and a $250,000 fine per count.

In June, the U.S. Securities and Exchange Commission filed a civil complaint against Davis. Without admitting or denying the allegations, Davis has entered into a partial settlement with the SEC. The settlement bars him from any further sale of securities in a pooled investment vehicle, as well as from future violations of anti-fraud and securities registration provisions of federal securities laws. Davis also must cooperate with a court-appointed receiver, according to the settlement.