A Chicago-based financial advisor was sentenced to more than 13 years in prison after pleading guilty to defrauding at least 25 clients out of $5.1 million over a period of 15 years, the Department of Justice announced this week.
DaRayl Davis pleaded guilty earlier this year to one count of mail fraud in Illinois federal court. In the government’s sentencing memorandum, Assistant U.S. Attorneys Christopher Catizone and Philip N. Fluhr asserted that Davis had “deliberately exploited” individuals that he knew trusted him.
“Davis targeted his victims personally, seeking out fellow church members, individuals who had previously purchased legitimate investment products from him, or ‘friends’ to whom he offered the ‘favor’ of an inside investment opportunity,” Catizone and Fluhr wrote.
Between 2003 and 2018, Davis encouraged those individuals to invest in his two firms, the Washington, D.C.–based Financial Assurance Corporation and the Los Angeles–based Affluent Advisory Group. To entice investors, he claimed they would get fixed annual interest payments as well as guaranteed protection against any losses; according to his 2018 indictment, the annual payments would total at least 6% of their investment. Additionally, he said some investments would be backed by a famous (but unnamed) multinational life insurance company.
But no investments had an affiliation with the unnamed life insurance company, and Davis did not invest the funds he raised from clients as he said he would. Instead, Davis used the funds for personal expenses, including about $476,500 on a mansion in Los Angeles, credit card payments, theater and airline tickets, luxury hotels, car rentals and a club membership, among others, according to the indictment.
In 2018, the SEC won a default judgment against Davis for his connection to the scheme. The commission argued Davis used seminars he named the “Smart Money Academy” and “The Smart Money Millionaire Experience” and would use his religious affiliation to boost trust among potential investors. Davis was a registered representative and investment advisor from 2005 to 2008 but was no longer registered with the SEC in any way, according to the complaint the commission filed in late 2017.
To keep the scheme under wraps and to keep investors from questioning further, Davis would also use funds from some investors to pay others, maintaining the illusion the investments were earning returns. He also created false investment documents, “including fake contracts outlining the purported terms of the non-existent investments” as well as falsified account statements, according to the original indictment.
Of the more than 25 victims, many were retirees who invested the entirety of their life savings with Davis.