SEC: ‘Sham Operation’ Run By Convicted Felon In U.K. Took $10.2 Million From Investors; U.S. Investment Adviser Charged With Fraud

Want international, real-life intrigue? It’s in there. Want venues from the United States to the United Kingdom and Switzerland? They’re in there. Want allegations that a mysterious criminal in Britain used two identities and operated a sham investment company?

Today’s your lucky day. They’re in there, too.

Now, a former investment adviser from Arizona has been charged with fraud by the SEC for arranging a sweetheart deal, starting a secret company and setting the stage for his clients to be fleeced by putting millions of dollars in the hands of a convicted felon using a temporary office.

Charged by the SEC was Kevin H. Blood, of Scottsdale. Blood formerly was  president and chief executive officer of Capital Wealth Management Inc. (CWM), which formerly was a registered investment adviser.

Meanwhile, Patrick Danison, who also is known as Eric F. Danison, has been jailed in the United Kingdom on criminal charges. Danison was the president of a mysterious firm known as Amkel Capital, which had a Swiss bank account and received $10.2 million in a deal arranged by Blood through a conduit known as Adelaide Partners LLC.

The SEC said Amkel was “a purported financial services firm.” It is listed as an “unauthorised” firm by the U.K.’s Financial Services Authority, which regulates markets, exchanges and firms in the United Kingdom.

Blood has settled the SEC charges without admitting or denying the allegations. Based on his sworn financial statements and other documents and information submitted to the SEC, a civil penalty was not imposed, the agency said.

The scheme began in February 2009, when Blood recommended that his clients provide a $10.2 million loan to Adelaide, which would invest the money with Amkel in the United Kingdom, the SEC said.

Blood formed a hedge fund with 20 of his clients, dubbing the fund ABC-CWM Inc.

“Blood represented to these clients that any investment opportunity that ABC-CWM made would be backed by a legitimate bank guarantee or other form of collateral,” the SEC said.  “[He] also allegedly represented that their principal would never be at risk and that he would not personally profit from any transaction he recommended to them other than his CWM management fee.”

Clients were told “ABC-CWM would receive a bank guarantee in exchange for the $10.2 million loan and earn 20% per month for two months,” the SEC said.

When recommending the investment, Blood did not tell clients he had arranged “a side compensation agreement with Adelaide Partners wherein he would receive 85% of any excess profits resulting from the investment,” the SEC said.

To siphon the excess profits, Blood started a company “using his wife’s name,” the SEC said. This company was known as LWJR Group Inc.

Adelaide ‘s role “was to act as the middleman and transfer the $10.2 million to Amkel Capital in exchange for [a] $200 million line of credit to trade in Amkel Capital’s medium term notes,” the SEC said.

A Meeting In London

As part of what the SEC described as “purported due diligence,” Blood traveled to the United Kingdom and met with Danison in London on Feb. 10, 2009.  He then caused Adelaide Partners to transfer the $10.2 million to an Amkel Capital bank account in Switzerland without ever securing a bank guarantee or any other form of collateral, the SEC said.

At that point, Blood had no control over his clients’ money. By April 2009, Blood had lost contact with Amkel and his clients’ $10.2 million loan to Adelaide was delinquent.

“Amkel Capital’s alleged U.K. headquarters was only a short-term rental space,” the SEC said. “Eric Danison, the president of Amkel Capital, has a criminal record, and he is currently incarcerated in the U.K. pending criminal prosecution.”

The agency noted that “Blood’s clients have not received the return of any of their $10.2 million investment” and that Danison’s operation was a “sham.”

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2 Responses to “SEC: ‘Sham Operation’ Run By Convicted Felon In U.K. Took $10.2 Million From Investors; U.S. Investment Adviser Charged With Fraud”

  1. Scottsdale, eh? Isn’t that where Guenther has a secondary business and abode? Is it mere coincidence that where ever he is, fraud exists? One of the things that make you go, hmmmmmmm.

  2. Is Eric F. Danison’s middle name “Fitzpatrick”?

    Between March 2006 and January 2007, he caused Prism Wine Bars Ltd “Prism Wine” to fail to maintain adequate accounting records; and as a result of the inadequacies in Prism Wine’s accounting records, the Official Receiver is unable to determine amongst other things: The total value of Prism Wine’s sales, nor, consequently, total VAT attracted by its sales; The names and addresses of all Prism Wine creditors and therefore the Official Receiver is not able to confirm the precise level of the company’s liabilities; The source of £42,497 that was deposited into the company’s bank account between February and June 2006. The Official Receiver is not able to ascertain a clear picture of Prism Wine’s income during the course of trading; The recipients of £27,555 in unexplained cheque payments from Prism Wine’s bank account; The recipients of £27,274 that was withdrawn from Prism Wine’s bank account in cash; The recipients of other payments by Chaps, telegraphic transfer and direct debit totalling £8,835 made by Prism Wine and the Official Receiver is unable to verify whether or not they have been paid as part of genuine company expenditure; Whether the directors, received monies from Prism Wine that they have not disclosed and if so, what amounts they received and whether these represented salary or loans; By continuing to trade after the company bank account was closed you had no way of ensuring that Prism Wine could pay its debts when due.