A formerly barred investment advisor and donor to Donald Trump's presidential campaign defrauded investors out of more than $6.8 million, according to charges filed this week by the Department of Justice.
David Schamens, the Greensboro, N.C.–based former advisor, was charged with one count each of wire fraud, securities fraud and money laundering, and the Securities and Exchange Commission also filed charges this week accusing Schamens of running a Ponzi scheme on dozens of investors over several years.
“This is not the first time that David Schamens has been charged by the SEC for misconduct and serves as a good reminder for investors to research potential advisors,” SEC New York Regional Office Director Richard Best said.
Schamens was originally associated with numerous registered entities between 1986 and 1990, including Alex. Brown & Sons and Carolina First Securities, according to his BrokerCheck profile. In 1992, the SEC settled charges against Schamens, arguing he’d “misappropriated investor funds,” and the commission permanently barred him from the industry, according to the SEC complaint from this week.
Additionally, Schamens had also skirted campaign finance laws as the head of a political action committee supporting Donald Trump’s 2016 run for president, according to ProPublica.
Beginning in 2014, Schamens began soliciting investors for funds that would fuel trading on entities he controlled, including TD Trading, TFG Trading and TradeStream Analytics, according to the Justice Department. Schamens purportedly told investors that their funds would be used to bankroll short-term investment loans for day traders to work on the TradeStream platform, and that the trading group’s revenue would never be derived from investors’ profits.
Schamens told investors their investments would lead to returns ranging from 12% to 30% annually, but the DOJ argued Schamens used the victims’ funds for his own purposes, including vacations, luxury cars and a down payment on a home. He used some money to pay back previous investors to give the appearance of profits, according to the DOJ. The SEC allegedly found Schamens also used the funds for attorney payments, retail purchases and political contributions.
Starting in 2019, Schamens added a new component to the scheme, soliciting investors for the TradeStream Algo Fund, an algorithm trading pool he claimed to have developed. Schamens would tell investors to wire funds directly or to transfer funds from their IRAs, according to the DOJ. To hide the fraud, Schamens would move the investors’ funds through a number of different bank accounts he controlled or have the funds directed toward a number of unnamed law firms. The Justice Department claimed Schamens gave investors false monthly account statements, fabricated other statements showing positive gains for investors and would explain away investors’ questions about delayed payments.
At one point one victim purportedly wrote Schamens an email entitled “Wits End,” in which they wrote that they “just don’t know what to do to get our funds from you.”
Schamens’ checkered history extends beyond the securities industry; in 2016, he established the America Comes First political action committee to support Donald Trump’s successful run for president. According to reporting from ProPublica, the PAC failed to disclose any information about its fundings, donors or expenditures to federal regulators.
Eventually, regulators learned the majority of the PAC’s donations came from Schamens, with an attorney from the Brennan Center for Justice writing that the group essentially was “not obeying any campaign finance law whatsoever.”
In a phone interview this week with the Daily Beast, Schamens claimed the new charges from the DOJ and SEC were the result of a political vendetta against him for his support of Trump, calling the accusations “thermonuclear war.” (Schamens could not be reached for comment).
Schamens was scheduled for his first court appearance in New Jersey federal court this past Tuesday, according to the DOJ; each count carries a potential maximum sentence of 20 to 25 years, as well as civil penalties going as high as $500,000.