Three Hedge Fund Managers Sentenced In Ponzi Scheme Case

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Three Hedge Fund Managers Sentenced In Ponzi Scheme Case

Three hedge fund managers have been sentenced in a Ponzi scheme case that conned investors out of $40 million. Jeffrey Toft of Sioux Falls, South Dakota received 66 months in prison. Chad Sloat of Kansas City, Missouri received 70 months. And Michael Murphy of Deep Haven, Minnesota received 48 months. All three of their sentences will be followed by two years of supervised release. The judge further ordered that the defendants pay restitution to their victims. Toft will pay $2,172,666, Sloat will pay $3,747,130, and Murphy will pay $2,552,824.30. Sloat will additionally pay $93,727 to the IRS. Jonathan Davey of Newark, New Jersey, a fourth defendant, is currently awaiting sentencing.

Judge Conrad stated during sentencing that the defendants exhibited callous greed causing devastating financial ruin to hundred of elderly and vulnerable victims. Conrad also noted that the lengthy sentences were reasonable provided the predatory nature of the scheme.

According to court documents, the trio of defendants operated hedge funds as part of a $40 million Ponzi scheme functioning under the name Black Diamond Capital Solutions. The three persuaded their victims to give them their money by asserting that the defendants had done their due diligence on Black Diamond and were operating legitimate hedge funds with significant safeguards. In actuality, however, those statements were inaccurate. As Black Diamond began to implode, the trio started a new Ponzi scheme and used a number of different bank accounts administered by Davey to promote the scheme. The three deposited new victim money into these accounts and used the money to make lulling payments to other victims and for their own personal expenses.

Toft pleaded guilty in November 2012 to securities fraud conspiracy, wire fraud conspiracy, and money laundering conspiracy. Sloat pleaded guilty in October 2012 to securities fraud conspiracy, and Murphy also pleaded guilty to securities fraud conspiracy in January 2013. Davey was convicted at trial of securities fraud conspiracy, wire fraud conspiracy, money laundering conspiracy, and tax evasion. He is currently awaiting sentencing by the court.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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