Court Enters Default Judgment Against "Smart Money" Financial Adviser Charged By The SEC With Securities Fraud
Litigation Release No. 24087 / March 28, 2018
Securities and Exchange Commission v. DaRayl D. Davis and Affluent Advisory Group, LLC, Civil Action No. 1:17-cv-09224 (N.D. Ill. filed December 22, 2017)
The Securities and Exchange Commission announced today that a default judgment as to liability has been entered against DaRayl D. Davis, a self-styled "Financial Coach" charged in December 2017 with operating an offering and investment advisory fraud.
On December 22, 2017, the SEC filed a complaint in U.S. District Court for the Northern District of Illinois, alleging that Davis raised more than $5 million from approximately 30 investors by selling them fictitious financial products described as "corporate bond notes" and "guarantee bonds." Davis hosted seminars marketed as the "Smart Money Academy" and "The Smart Money Millionaire Experience," and used his religious affiliation to gain investors' trust. Investors believed the financial products sold by Davis were legitimate and would preserve and grow their investments. The complaint alleges that the investments were not legitimate and that Davis fabricated documents and made false statements concerning the fictitious financial products. Davis did not invest the money he raised from his clients, but instead used the money to fund a lavish lifestyle, repay prior investors, and further his fraudulent scheme.
The SEC's complaint alleges that Davis violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and a civil penalty from Davis, as well as disgorgement from relief defendant Affluent Advisory Group, LLC, against which default judgment as to liability also was entered.
At the time it filed its complaint, the SEC requested a temporary restraining order and an order temporarily freezing Davis's assets, both of which were granted the same day. On January 24, 2018, the Honorable Amy J. St. Eve granted the SEC's motion for a preliminary injunction, extended the asset freeze pending final judgment in the case, and entered default against Davis. At a hearing on March 26, 2018, Judge St. Eve entered default judgment against Davis as to liability, as well as against relief defendant AAG. Judge St. Eve also held Davis in contempt for violating the asset freeze and scheduled a hearing for May 10, 2018 to determine how to proceed with the remedies phase of the case.
The SEC's investigation is being conducted by Scott A. Thompson, Norman P. Ostrove, and Jacquelyn D. King, and supervised by Kelly L. Gibson. The litigation is being handled by Mark R. Sylvester, Jennifer Chun Barry, Mr. Thompson, and Mr. Ostrove, as well as Jonathan S. Polish of the SEC's Chicago Regional Office.