David Blaine Welliver, 56, pleaded guilty for defrauding investors in the Dblaine Fund, a mutual fund for which Welliver acted as investment advisor, of at least $1.2 million. Welliver pleaded guilty to one count of securities fraud on Wednesday before Senior U.S. District Judge Paul A. Magnuson in U.S. District Court in St. Paul, Minnesota.
“Today’s guilty plea demonstrates how federal law enforcement works together to help put an end to the criminal behavior of those who prey on investors for their personal financial gain,” said Special Agent in Charge Shea Jones of IRS Criminal Investigation. “IRS Criminal investigators will continue to use their financial expertise to identify these types of investor fraud schemes.”
According to the defendant’s guilty plea, Welliver, in 27 separate transactions between October 2010 and May 2011, borrowed a total of $4 million from Lazy Deuce. Aside from a $95,000 payment to acquire the assets of a mutual fund, Welliver did not use any of the other proceeds of the Lazy Deuce loans to acquire mutual funds as he had represented to Lazy Deuce. Instead, Welliver diverted over $500,000 in proceeds from the Lazy Deuce loans to his own personal use, including for landscaping and interior decorating at his personal residence, to purchase land adjacent to his personal residence, to buy a personal vehicle, and to pay for his son’s college tuition.
According to the defendant’s guilty plea, between December 16, 2010, and April 15, 2011, Welliver caused $1.725 million in Dblaine fund investors’ money to be invested in a shell company formed by several Lazy Deuce pricipals, called Semita Partners LLC (Semita). At the time Welliver made the investments in Semita, he knew that Semita was a shell company formed by principals of Lazy Deuce – the same company from which Dblaine Capital had borrowed money – and that Semita had no operations. On December 31, 2010, in order to meet a series of redemptions in the Dblaine Fund, Welliver liquidated nearly all of the stocks held by the Dblaine Fund. Following the liquidation, the Dblain Fund’s only holdings consisted of worthless Semita shares and cash held in a money market account.
Asa result of Welliver’s fraud scheme, Dblaine Fund investors lost more then $1.2 million.
The case was a result of an investigation conducted by the United States Postal Inspection Service, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation.
This case is being prosecuted by Assistant United States Attorneys Kimberly A. Svendsen and Benjamin F. Langner.