Black Diamond Capital Solutions

Date:

October 7, 2014

Type of alert:

Ponzi Scheme  

Three former hedge fund managers were recently convicted of securities fraud in a Ponzi-like scheme. Specifically, Jeffrey M. Toft of Sioux Falls, South Dakota, Chad A. Sloat of Kansas City, Missouri and Michael J. Murphy of Deep Haven, operated Black Diamond Capital Solutions, an ostensible hedge fund that was really nothing more than a Ponzi scheme.

The three hedge fund managers recruited investors by falsely claiming to have done significant research on Black Diamond and assured investors that it was a safe investment. When Black Diamond began to decline, Toft, Sloat, and Murphy started a new Ponzi scheme using separate bank accounts issued by Jonathan A. Davey, another defendant who has yet to be sentenced. In total, all three hedge fund managers stole $40 million.

Other brokers and hedge fund managers involved in the Ponzi scheme are Keith Franklin Simmons, Bryan Keith Coats, Deanna Ray Salazar, Jeffrey M. Muyres, Roy E. Scarboro, James D. Jordan and Stephen D. Lacy.

  • Bryan Keith Coats, 51, of Clayton, N.C., pled guilty on October 24, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Coats is awaiting sentencing.
  • Deanna Ray Salazar, 54, of Yucca Valley, Calif., pled guilty on December 7, 2010, to conspiracy to commit securities fraud and tax evasion. Salazar is awaiting sentencing.
  • Jeffrey M. Muyres, 36, of Matthews, N.C., pled guilty on May 17, 2011, to conspiracy to commit securities fraud and money laundering conspiracy. Muyres was sentenced to 23 months’ imprisonment by Chief Judge Robert Conrad, Jr., on January 18, 2012.
  • Roy E. Scarboro, 47, of Archdale, N.C., pled guilty on December 3, 2010, to securities fraud, money laundering, and making false statements to the FBI. Scarboro was sentenced to 26 months’ imprisonment by Chief Judge Robert Conrad, Jr., on May 4, 2011.
  • James D. Jordan, 49, of El Paso, Texas, pled guilty on September 14, 2010, to conspiracy to commit securities fraud. Jordan was sentenced to 18 months’ imprisonment by Chief Judge Robert Conrad, Jr., on June 29, 2011.
  • Stephen D. Lacy, 52, of Pawleys Island, S.C., pled guilty on December 9, 2010, to conspiracy to commit securities fraud. Lacy was sentenced to six months’ imprisonment by Chief Judge Robert Conrad, Jr., on May 4, 2011.

The main Ponzi schemers were also sentenced as well. Toft was sentenced to 66 months, Sloat was sentenced to 70 months in prison, and Murphy was sentenced to 48 months in jail. All three were ordered to pay back restitution to the victims and put on supervised release after they serve their prison sentences.

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