October 7, 2014
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.
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.