DaRayl D. Davis DaRayl D. Davis came from
humble beginnings from a small town called Bowie, Maryland outside of Washington D.C.
He moved to the big city of Chicago to try and make it in the insurance business.
He started out as a modest insurance salesman and quickly gained confidence in his financial
knowledge. In 2005, he started moving up the ranks. He started two firms,
Financial Assurance Corp (FAC) in Chicago and Affluent Advisory Group (AAG) in Los Angeles.
By 2008, he was a self-proclaimed life coach, media personality, and investment advisor.
Davis went on the public speaking circuit as a financial coach who pledged to help
people invest their wealth and build a healthier relationship with their money.
He also spoke to students from low income communities through the I Have
A Dream Foundation and gave them a quick course in investing, spending, and saving.
Davis held other seminars about financial planning called the “Smart Money Academy”
and “The Smart Money Millionaire.” He started a podcast called Wealth of the
Nation about economic issues and became the vice chairman of Operation HOPE,
a nonprofit dedicated to teaching financial literacy to students.
In 2009, he published a book about retirement saving
called Economic Secrets of the New Retirement Environment. The book achieved moderate success,
and ranks number 6,740 on Amazon’s best-selling books about retirement.
It seemed like the perfect story about a self-made man who worked hard and got rich
while helping his community learn about the economy and save for retirement.
But in this story, Davis turned out to not be the hero, but the villain.
Public Image Davis had a carefully
curated social media presence that showed him as a successful investor who mingled with celebrities,
went to fancy clubs, drove sports cars, and traveled around the world. But above all,
Davis liked to brag about how much he cared for the community.
His Instagram bio describes Davis as a CEO, best-selling author, executive producer and host.
His Instagram page is sprinkled with pictures of him with Will Smith, Magic Johnson, Barack Obama,
and other celebrities. His Pinterest describes him as an “eradicator of financial illiteracy.”
He was respected in the investment industry and especially in Chicago
and Los Angeles where he owned and operated his two firms.
The New York Times even quoted Davis in an article about retirement in 2011.
Davis was also active in his faith community, a church in his hometown
in Maryland. Many of his clients were church members, previous customers,
or old friends. He offered them an exclusive opportunity–available only to those
close to him–for an inside investment project with one of his firms, FAC
or AAG. His customers saw Davis as a friend and fellow congregant who wanted the best for them.
Aging Population Davis saw the aging population
as the perfect target. They saw Davis’s success and were eager to let him invest their money,
if it meant that they could retire sooner or at least be able to make money during retirement.
They trusted him. Many of his clients turned over their entire life savings to Davis.
Davis touted himself as a seasoned financial advisor with over 20 years in the business.
He guaranteed his clients that he would make them a profit and liked to prove his success
with his fancy cars, brand name clothes, and lavish spending. Davis told his clients
that they would receive fixed annual interest payments and protection against losses–that their
investments would be backed by Allianz Insurance, a well-known international life insurance company.
In written agreements with his clients, Davis agreed to look over their current investment
portfolios and develop a new way to manage their assets, in exchange for a fee. Davis and
his investors pledged to work with each other to achieve their financial goals. Some clients sold
other assets, believing that Davis’s investments would offset or even surpass these losses.
From 2013 to 2018, at least 30 people from Illinois,
Pennsylvania, California, and Washington D.C. trusted Davis with their life savings.
But instead of earning money for his elderly clients, Davis spent it all.
The Product From 2003 to 2017,
Davis took more than $5 million from his clients. He did this by recommending and selling securities
that he called “corporate bond notes” with guaranteed interest rates between 7 and 20%.
Other investment products offered a bonus 5 to 8% if the investor allowed the note to fully mature.
In 2012, Davis started selling a multi-year guarantee bond or multi-year interest guarantee
account that promised interest rates of 6 to 10% with an additional cash bonus
for the initial deposit. He used different names to market this type of investment and
was almost never consistent in his promotional material. Davis offered flexibility with this
newer investment option, allowing clients to choose one, two, or three year terms. The deal
was that if they chose longer terms, they would receive higher interest payments in return.
Davis created brochures and fliers about all of his investment products,
using the logos and trademarks of Allianz and his other corporate partners. Davis had his clients
sign documents that promised their money would be backed by Allianz insurance and held by Wells
Fargo. The documents also claimed that Davis’s firms were affiliated with Nationwide Financial.
Davis marketed a variety of investment plan options like the Capital Preservation Plus
Account that promised large profits plus the ability to withdraw the invested money
at any point. The incentive to invest with Davis was the promise for stock market-like
growth without the instability or potential losses that come with the real stock market.
Davis promised to make profits through the sale of corporate bond notes by AAG
or FAC. Investors paid for the Davis securities mainly through personal checks made out to FAC
or AAG or wire transfers to the firms’ bank accounts. All accounts were owned
and controlled by Davis. He was able to withdraw and deposit funds at will.
The Scam When one investor asked Davis for her money,
he told her that he couldn’t give it to her because it was invested in a bond portfolio
with the company Dimension Funds Advisors. She later found out that this firm didn’t exist.
And it gets worse. Much worse. Davis was lying to investors the whole time about the status of
their corporate bond notes. In fact, there were no corporate bond notes. So when they asked for their
money back, he said he couldn’t repay them because the bond portfolio wasn’t “liquid,” in addition to
many other excuses. In fact, Davis didn’t have any corporate bond notes or invest in bond portfolios.
His investors’ money never even made it to FAC or AAG. It went straight into his personal pocket.
The companies that were supposed to “back” his clients’ investments, like
Allianz Insurance, never had any involvement in Davis’s business.
Davis had no accounts at Wells Fargo and instead used Chase Bank and Bank of America.
Allianz Insurance had no record of FAC or AAG in their partnerships. Nationwide Insurance did not
have an affiliation with Davis or any of his firms. The documents he made were completely
fictitious. All of his brochures were made without the other companies’ permission
and were made with copy and pasted logos and trademarks that he had no right to be using.
In summary, Davis sold fake investment products using the names of real companies and insurers in
order to steal from his clients. He did not keep record of his investors’ specific contributions
or even keep the funds in separate accounts. Davis never had any actual investment products to sell.
To keep his investors from asking questions, Davis typed and sent fake account statements
to customers, showing profits of thousands of dollars per month.
One client was a retired US Postal Service employee who handed over more than $200,000
of his retirement savings to Davis in 2015 for investment purposes. Davis sent him
false statements showing a 30% profit over 17 months. Of course, none of this profit was real,
and all of his money was used for Davis’s personal expenses and to pay off other
investors. This man lost all but $15,000 of his retirement savings through Davis’s Ponzi scheme.
Another client lost more than $650,000 in retirement savings. Another client was a widow
who was trying to schedule a brain surgery at the Cleveland Clinic in 2016. She needed money for the
procedure and frantically contacted Davis asking if he could return her investment. But when she
tried to get her money back, he came up with phony excuses about why he couldn’t return it to her.
In addition to the financial lies, Davis was also lying to the youth
of America. He said that his Smart Money Academy, his financial planning workshop, was accredited by
AdvanceED, a nonprofit organization that runs preschools and K-12 programs. It later came to
light that the Smart Money Academy was never accredited by AdvancED like Davis claimed.
Lush Life Davis controlled all
of the FAC and AAG accounts where investors deposited their money. He transferred funds
between these accounts and other entities whenever he wanted. He used some of the money
he received from new investors to pay off other investors who were asking for their money back.
Records show that Davis used more than $1 million in new investments to pay off old investments.
He spent the rest of the funds on advancing his scheme and financing a luxurious life.
Some of the $5 million stolen from investors went towards maintaining the FAC and AAG
office buildings, web hosting services, and utilities. This allowed Davis to maintain
appearances so potential investors would believe that Davis and his products were legitimate.
Davis also used the money to market his Smart Money Academy and pay for
his participation in small business expos.
Perhaps the most shocking use of investors’ money was the
at least $500,000 used to rent an eight bedroom mansion in the Hollywood Hills,
a home previously rented by celebrities. It cost $40,000 per month to rent.
He spent $100,000 on airline tickets and $40,000 on luxury hotels.
Other money was used to rent a home in Maryland and pick up the tab at nightclubs,
not to mention the Lamborghini, Ferrari, and Rolls Royce car rentals. Davis also used
clients’ money to join the Bronze Buffalo Club, an exclusive Western themed sports club with a
high price tag. He used another $700,000 to pay off personal credit card bills.
He spent nearly all of his investors’ money,
leaving them without any retirement or life savings.
Caught In 2017, the SEC filed a civil
complaint against Davis and AAG, saying that he sold himself as a financial services professional
but was actually running a Ponzi scheme. The SEC won a default judgment against him in 2018.
Then, the FBI opened an investigation into Davis and his firms after two of his Chicago clients,
a married couple, filed a complaint.
Davis violated court orders by opening new bank accounts,
signing up for credit cards, incorporating a new business entity and sending his mother to
the ATM to withdraw cash on his new cards. He did all of this while lying to the SEC, FBI,
and federal court. He was indicted in June 2018 and his assets were frozen.
Still, Davis continued to persuade investors to believe in him and his investment products.
Just months before he stood trial, Davis collected
$150,000 and used some of this to repay other investors who were demanding their money back.
Aftermath In May 2021,
Davis took the stand in a trial by jury in the Northern District of Illinois. He pleaded guilty
to mail fraud in connection to the crime. Judge Robert Gettleman sentenced him to 160 months in
federal prison – 13 years and four months–for defrauding clients out of more than $5 million.
While it might sound like justice was served for Davis,
the villain. So many of his victims are still without the retirement funds and
life savings they have been working hard for, for their entire lives.
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Let us know in the comment section whether or not you think it’s a red
flag for someone managing someone else’s money to be driving a Ferrari or a Lambo!