Stunning new development in the Capital Blu Forex Case !!!

The prominent forensic accounting and consultancy firm Lewis B Freeman has been placed into receivership. So who is Lewis B Freeman.
This was the firm which was appointed receiver for Capital Blu Management, which is the Donavon Davis Jr. led forex trading outfit which ripped off its clients almost US$17M dollars.
The receiver in his last report in May 2009 had then indicated that it had only found approx. $500k and that a significant amount funds were spent on sleaze, booze, vacation and rental.

Lewis B freeman itself has now been placed into receivership as the authorities recently raided the firm trying to trace us$3.6m which is said to be held by the firm.
This is a stunning new development, and the question is can Capital Blu clients now throw in the towel at this stage.

Read more here.

http://www.law.com/jsp/article.jsp?id=1202434695199&pos=ataglance

Capital Blu CEO charged for fraud

Investforlife has just received news that Capital Blu CEO , Donovan Davis Jr, has been charged for fraud in Florida.

It has been reported that Mr Davis at times would blow, over US$40,000 in one night in a gentleman’s club.

In addition we are receiving word that he would travel on a regular basis via charter flights.

We will update this post as soon as we have more information, so stay tuned.

Links

Capital Blu Suspended by NFA

The NFA has suspended Capital Blu’s membership. This is the latest twist in the Capital Blu saga. 

See details below:

NFA takes emergency enforcement action against Florida firm, Capital Blu Management LLC

September 17, Chicago – National Futures Association (NFA) announced that it has taken an emergency enforcement action against Capital Blu Management LLC (Capital Blu), a Commodity Trading Advisor located in Melbourne, Florida. Effective immediately, the Member Responsibility Action (MRA) suspends Capital Blu from NFA membership and prohibits Capital Blu from soliciting or accepting any customer or pool participants’ funds or placing trades on behalf of any customers or pools. The MRA also prohibits Capital Blu from disbursing or transferring any funds of customers or pools from any accounts without NFA’s approval and from acting in any manner which requires registration under the Commodity Exchange Act.

NFA issued the MRA to protect Capital Blu’s customers because Capital Blu has refused to fully cooperate with NFA in an examination of the firm and its operations. The investigation was prompted when NFA received allegations from customers of Capital Blu that it had provided false statements to customers and participants in the CBM FX Fund LP and possibly other pools.

The MRA will remain in effect until Capital Blu has demonstrated to the satisfaction of NFA that it is in complete compliance with NFA Requirements. Capital Blu may request a hearing before NFA’s Hearing Committee.

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the derivatives markets.

source: http://www.nfa.futures.org/news/newsRel.asp?ArticleID=2182

NFA wants information from Capital Blu investors

The trouble for Capital Blu does not end with its reported 90% loss. The NFA a notice issued on September 12, 2008 is asking if persons have done business with Capital Blu Management LLC, Blayne Davis, Donovan Davis, Damien Bromfield, among others, please contact them. This is not a good sign for Capital Blu.  

Notice I-08-23

September 12, 2008

Request for Information

Please contact NFA Manager Heather Johnson at (312) 781-1554 (hjohnson@nfa.futures.org) or NFA Compliance Director Ed Dasso (312) 781 -1551 (edasso@nfa.futures.org) immediately if you ever transacted business with, currently carry or have carried any accounts (including joint accounts) in the name of, or controlled by, any of the following individuals or entities:

Capital Blu Management LLC
CBM FX Fund LP
Damien Bromfield (Capital Blu Principal)
Blayne Davis (Capital Blu Principal)
Donovan Davis (Capital Blu Principal)
Joseph T Cavallaro
Christopher Shane Clausen
Nakano Capital Partners LP
Nakano Capital Advisors LLC
Nakano Capital Management LL

Capital Blu was never registered locally by the FSC and the FSC rightly warned and placed them on the list of UFOs. It now brings into question whether a merger with OLINT, as mentioned by Peter Bovell in his interview on Nationwide News Network, would have made a difference . The NFA is yet to respond to the response provided by I Trade FX to its complaint, in which OLINT figured prominently.

Source:

Capital Blue in a mess

Capital Blu is trouble. After reporting a fantastic 57% in one month earlier in the year, things gone in the opposite  direction. Some managers have been allegedly removed and a maximum drawdown of 15% has been imposed.

See letter. A few person on this blog had questioned the auditors being used. 

Capital Blu Investors Suffer 90% Losses.
Dear Capital Blu Clients,

In Mid-July we commenced trading at Saxo Bank and began running parallel programs with PFG. While both programs were utilizing the same exact strategy and held essentially the same positions; our trading team began noticing significant differences in the platforms. Some of the key differences were:

  •  Quoted Rates with inflated spreads on both platforms.
  •  PFG required margin on net position; Saxo Bank required margin on gross positions.
  •  PFG portfolio could be managed through a single master account; Saxo Bank’s portfolio had to be managed by each individual account.

What appeared to be manageable challenges on both platforms unfortunately were exaggerated on August 8th when the market made a dramatic trend reversal.

On the Saxo platform margin calculations which were averaging around 20% rose to over 100+% (extremely abnormal). Our trading team immediately began rebalancing the portfolio to reduce margin, however, due our inability to rebalance the entire group of managed accounts at one time we had a few clients get stopped out resulting in catastrophic losses. The accounts that were still below the 150% threshold had to be managed independently which ultimately compromised the trading strategy. Over the course of the next several weeks our trading team worked to rebalance each individual portfolio, however, since we were forced to unload positions based on necessity we were left with very few favorable positions and ultimately saw the entire managed account portfolio stopped out for approximately an 80-90% lose in every account.
We truly understand the frustration of each and every customer and wish there were something more that we could have done prior. In hindsight there were several actions we would do differently; however, this isn’t a time for what ifs as you deserve a plan for how we are going to move forward.

So the question many of you are asking of Capital Blu is where we go from here. Well first and foremost, you have our commitment that we will do everything commercially, legally and ethically possible to rebuild each and every client’s account.
Internally, we have taken the following actions:

  • Blayne Davis, Director of Portfolio Management is no longer a member of the Capital Blu.
  • Implementation of formal risk management procedures to ensure a client’s max drawdown is 15% regardless of trader, platform, strategy, etc.
  • Indefinite suspension of the BluFX Options Benchmark Managed Account Program.

Proposed Reparation:
While we understand that many of you are looking for us to simply cut a check to reimburse the losses, we have been advised by our legal team that we cannot commercially offer this type of reparation. As per the program disclosure, Capital Blu Management will honor the high watermark of the August 1, 2008 balance for all clients in the BluFX Options Program. In essence, we will rebuild each and every account free of any commissions or performance fees until we have brought the account balance back to the August 1, 2008 balance.

Kind Regards,

Joe Mills | Director of Sales & Marketing
Capital Blu Management LLC

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