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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26 Responses

  1. The image comes to mind: children playing with matches.

    The trading team “began noticing signficant differences in the trading platforms”! Are these guys the keystone cops? Just making it up as they go along?

    This is so unprofessional; if they are not Ponzi criminals, and people say they are not, then they at least have been astonishingly negligent. It’s amazing what a nice suit, good manners and a way with words are able to accomplish.

  2. Bob:

    Could you explain this to me?

    ….”our trading team began noticing significant differences in the platforms. Some of the key differences were:

    1. Quoted Rates with inflated spreads on both platforms.

    2. PFG required margin on net position; Saxo Bank required margin on gross positions.

    3. PFG portfolio could be managed through a single master account; Saxo Bank’s portfolio had to be managed by each individual account.”…

    How is #1 a “difference” between the two platforms, when Cap Blu’s own statement states “both”?

    Shouldn’t #2 and #3 be something that was known to the principals of Cap Blu prior to commencement of trading on these platforms?

    To me, their statement appears to be hastily put together without much forethought!

    The good thing is that they did not have much funds under management and/or much Jamaicans money.

  3. Dave Sin:

    Yes, of course i can explain it to you. it’s very simple, really. But I am a little busy right now. Do you mind if I get back to you a little later?

    Nine months later?

  4. Notice how the onus is to be placed on the members….Olint tried this but ran into a brick wall early.

    From members to the management of these schemes: If you do not honor your obligations you will go to jail. the onus is on you to stay out.

  5. http://www.jamaica-gleaner.com/gleaner/20080914/auto/auto1.html

    Mr. Shaw?…hello? hello?…hello?……Mr. Latibudeire?….hello?…hello…..anybody home?….hello..

  6. http://www.jamaicaobserver.com/magazines/Business/html/20080913T050000-0500_140150_OBS_BAD_DEBTS_GROW_.asp

    When sirach talked about this months ago most were saying ‘no’…..what unno a say now. Don’t worry I never had any doubts even when you all were saying no anyway…(smile).

  7. 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
    Blayne Davis
    Donovan Davis
    Joseph T Cavallaro
    Christopher Shane Clausen
    Nakano Capital Partners LP
    Nakano Capital Advisors LLC
    Nakano Capital Management LLC

  8. Sirach:

    I think people have been quick to point to Olint/Cash Plus as THE source of these bad debt drivers. I maintain that there are much larger forces at play. Such as:

    1) High inflation rate which is trending above 30 %
    2) Reduction in Remittance
    3) Poor consumer confidence…less spending
    4) World economy contraction
    5) Tighter credit guidelines (inability to refinance out of the problem; increase interest rates, etc.)

    http://www.sunheraldja.com/article/show/1545

    http://www.sunheraldja.com/article/show/1557

  9. Where does the poor consumer confidence come from?…..the slowdown and subsequent cesation of payment by the schemes.

    Remittances were actually on a major increase….BUT because the increase in remittances came largely from the diaspora’s investment in the schemes back here then the slowdown shall continue at an exponential rate.

    Yes the world economy and inflation are noted….remember we get oil from ‘petrocaribe’ at concessionary prices….but politicians need excuses….like the schemers they have insecurities too.

    Tighter credit guidelines…..obviously….forget the macro and forget the corporate here for a minute…

    If your bredrin came for a loan in these times and repayment was crucial to you would you lend the bredrin?…..Especially when dem want to tell you that them soon get them money from like Olint?…..Dem turn parrot for David Smith…hahahaa….sad..but yes comical in a way. some of them are so adamant that you will be repaid….because their money going to come through in nine months…..;..

    Do you know how many person to person loans are gone south? Many Many dear friends….

    Nowadays when most people go to try refi. their loans it is a new face to greet them at the institutions…..you think that is coincedental? If you do don’t worry because Cap Blu will pay you as fast as Olint or Ingid loiten….soon come…..

    Anyway….work to be done…

  10. A note on credit

    The personal credit market in jamaica is like the 1940’s U.S.A. at best

    People will default on credit cards here a lot.

    Now in the U.S.A. it is different now…bancruptcy does not absolve the debt…only the person….the debt remains….it can keep you out of jail but you will have to pay back…

    It is for this reason that the jagan diaspora is more active in trying to get their money back. The social system here in Ja is more about shame and so strong it is that people would not mention they put money in schemes….

    They need not worry with such foolishness because if sirach is not satisfied sirach is going to release publicly the names of all ‘investors’ and the amounts.

    In Jamaica it is the banks etc like First Global for instance who need to sell credit in order to be doing any business here.

    In the diaspora it is different….the consumers need credit to survive…..MANY and I repeat MANY Jagans in the U.S. A in particular are facing basic SURVIVAL issues due to the schemes…

    them do not come home in the best of times (if they don’t have enough to show off with) so…..you not going to see much of them in the coming years..

    Remittances?…….as Miss Lou would probably say, ” remittances…in reverse.”

  11. Who changed the bancruptcy rules to favour the banks and hurt the Jamaicans in thew U.S. A? Joe Biden

    Who does he run with? Barack Obama…..hmmm

    Unno neva thought about that ehh? But Barack is ‘black’…..so the credit lik the Jagans going to feel is worth it …right?

  12. Just some maths with a few assumptions

    Capital blue is going back to their conservative trading policy and employing preservation of capital.

    they are successful at what they do

    they had said 2 -5 % per month .. thus an average of 3.5 %

    if a person had $100 and they lost 90 %.. then they would have $10

    if now capital blue decides to work , without any fee, to give back the person their original $100

    they would have to wait approx 7 years !!!!

    in year one it would move for $10 to $14.20

    in year 2 from $14.20 to $20.16

    in year 3 from 20.16 to $28,63

    etc

    thus these guys are promising to work for free and winning all trades according to their strategy of 3.5% per month, they would still take 7 years to pay back their investors !!!

  13. Cap blu people not going to make it…Jail dem a go. One thing that never leaves these people is arrogance…Remeber .loiten? They squander your money and then want to speak down to you…despotic.

    Perhaps if they toned down the arrogance and dealt with who dem must deal wid they could then ask for help.

  14. when are you jamaicans going to realize that you are being conned by these people (olint, cash plus, capital blu).

    some of them have simply stolen your money and claimed returns on it that never existed (cash plus). while others have gambled with it on markets that they dont seem to understand all while taking on massive amounts of leverage (olint, capital blu).

    say what you will about america but in this country the heads of these companies would have to publicly account for their actions and most likely would end up in prison.

  15. Wall Street Prepares for Potential Lehman Bankruptcy

  16. @ costofcarry

    well put my friend the main problem is these investors whether by greed or ignorance never seems to do their due diligent on these fund managers all they care about is what is their monthly ROI .Nobody never ask these guys to provide them with their trading records for at least the last 6months. Here in the states the average investors wants me to provide at lease 3years of my fund performance before deciding to invest with me, by law once my draw down reach 50% of equity
    I have to liquidate all position and dissolve the fund.

  17. My internet has been down for the last three days nas hence has not been able to read or post here. Its funny how things change fast on the financial lanscape.

    Forex trading clubs, managed forex funds etal has wreaked havoc on the Jamaican “investor”. They have all promised the rates to the moon and has instead delivered devastating body blows and now a final knock out punch to these investors.

    While the other clubs were not registered, Capital Blu was registered and NFA approved in the USA, and was seeking to get licensed in Jamaica.

    They have feared no better than all other so called forex traders, losing virtually all thier clients funds.

    Earlier this year Donovan Davis from Capital Blu had this to say.

    “What we do is tell UBS that we have a client and would like them to look through the UBS portfolio and invest in stocks, mutual funds and other instruments that have been around for years. The key is to diversify your portfolio. FX trading can be a high-risk affair. We try to make people understand it is not about the way you make the money, it’s about how you keep the money,” said Davis”.

    Did he say ” the way you keep the money”. How on earth does he therefore explain the 90% loss. Is that the stuff of fiction.

    Here is that article.
    http://www.jamaicaobserver.com/magazines/business/html/20080124T200000-0500_131788_OBS_HOTSHOT_TRADERS_.asp

  18. Jay,

    Why you have to go and post that article now. All you doing is getting people even more upset (if they have any energy left that is).

    Reading over the article and seeing the comments made by Mr. Smith, Mrs. Smith, and the rest of the cohorts brings laughter, tears, and anger all at once!

    does anybody think we’ll hear anything of any significance before december? (aside from more reports of real estate purchased by the axis of evil, or saviors of the country [depending who you ask])??

  19. Jay

    Thanks for the story. Another set of jokers. What I still don’t understand is how so many Jamaicans got taken in by these type of lightweights. We couldn’t all be born behind cow, surely?

  20. As a matter of interest – Donovan Davis is not a Jamaican. He is of Jamaican Parentage but caan trow on de patwa like a yardie. He was born and raised in Melbourne FL, went to Melbourne High School. He has a successful father with a hauling business. I “interviewed” him in January to consider investing and got a bad vibe. I believe he was 27 yrs old “coolie” and boasting about his 6 jets. My first thought was ENRON. What the hell do they need a fleet of aircraft and pilots. You don’t run a business this way. And only 4 principals. All the bling to bring in the big bling bling. He would also boast and name several famous celebrities as clients. I believe he was taking hedge fund/mutual mutual fund money primarily. His office was on the same floor as UBS (Paine Webber) of which he brought a UBS broker to Jamiaca on one of his “fishing” trips. I also confronted him at the time regarding the NFA investigations of his Broker in Pembroke Pines. His response was, “my record will be expunged” – I knew this total BS. I also contacted the lead attorney of the NFA who said he has never seen an investigation’s outcome “expunged ” from any record. I was also doing this investigation as a patriot. I was warned by the NFA to be very careful with dealing with Cap Blu. I contacted a Jamaica Gleaner reporter who wanted to know the details of who I am of which I refused hence no article was written. I was also privy to Donovan’s idea of making Capital Blu a multi level marketing forex scheme which was suited to bypass the US regulators via countries such as Jamaica and Trini and Tobago etc… BTW – His telemarketers were hounding me to get in for as little as $10,000 US as recently as 1 month ago. Don also had a Private Fund claiming high returns that his family was in and only sent one annual statement which was not audited. The minimum investment was $100,000 US. every time Don spoke with me or one of my friends or associates he was begging us to invest. It did cross my mind but MY DUE DILIGENCE prevented it. Don wanted to partner with David Smith with Don’s Holy Grail of computerized Forex trading. Mr. Smith declined to associate himself and his company with Mr. Davis.

  21. Cap Blu took 100K of my funds on 8/15/08. I have never heard from them again, ever, no statement(s), no communications. To my knowledge, never made a single trade on my account, just took my $…….

  22. i want to know about blayne davis can anyone describe him in age, appearance, and give a pic if possible

    • I met the group a couple of years ago.
      they were seeking financing for their “fund”.

      It seemed flimsy. a 3 man team.

      Blayne was young. late 20s , early 30s . Slick black hair , square jaw. A young “Gordon Gecko” kinda.

      His other 2 partners were older. One was a marketing guy and the other the “trader”.

      At the time, I thought it could be something good, but my instinct kept nagging me. It just seemed to have too much sizzle – without focus on the process.

      Im sorry to hear so many people were hurt by these people.

  23. DS made a good choice not to deal with Capital Blu….the worst of them all!

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