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On June 2, 2016, the Securities and Exchange Commission (the “SEC”) filed a complaint against Richard W. Davis, Jr. (“Davis”) and the entities named below (the “Receivership Defendants”), alleging that Davis, through the Receivership Defendants, raised at least $11.5 million through the unregistered sale of securities and failed to disclose to investors that the majority of the funds raised were either transferred to entities owned or controlled by Davis or transferred Davis in amounts in excess of the management fees that he had represented to investors he would be entitled to.  The SEC alleged various violations of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and certain rules established under those statutes.  In the complaint and a subsequent motion, the SEC requested that the Court appoint a receiver for the entities listed below to marshal the assets of the Receivership Defendants in an orderly fashion and determine whether and to what extent the funds may be repaid to investors.

Without admitting or denying any of the allegations in the SEC’s complaint, Davis consented to entry of a judgment in the Civil Action. On June 3, 2016, the Court entered judgement against Davis, which, among other things, permanently restrains and enjoins Davis from engaging in any further conduct that would violate the Securities Act of 1933, the Securities Exchange Act of 1934, or the Investment Advisers Act of 1940 and also requires Davis to disgorge funds in an amount to be determined by the Court upon a future motion by the SEC.  Davis also consented to the appointment of a receiver.

Accordingly, on June 8, 2016, the Court appointed the Receiver to take possession, custody, and control over all of the assets belonging to the Receivership Defendants or any of their subsidiaries, successors, and assigns (the “Receivership Estate”).  In addition, the Receiver has been directed to liquidate the assets of the Receivership Estate, conduct a claims determination process, and disburse the funds in the Receivership Estate to holders of allowed claims based on a distribution scheme to be approved by the Court in the future.

The Receivership Defendants include the following:

  • DCG Real Assets, LLC
  • DCG Commercial Fund I, LLC
  • H20, LLC
  • DCG PMG, LLC
  • DCG PMF, LLC
  • Finely Limited, LLC
  • DCG Funds Underwriting, LLC
  • DCG ABF Management, LLC
  • DCG Funds Management, LLC
  • Davis Capital Group, Inc.
  • Davis Financial, Inc.
  • DCG Partners, LLC
  • DCG Real Estate Development, LLC
  • Huntersville Plaza Phase One, LLC
  • Huntersville Plaza Phase Two, LLC
  • North Lake Business Park, LLC
  • Richard Davis Enterprises, LLC
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Memorandum

An investor has inquired as to what the next steps will be in the civil and criminal cases.  I am currently in the process of reviewing all claims filed in the civil case.  Once my review is complete, I file a report with the court as to my recommendations as to which claims should be allowed and in what amounts.

In the criminal case, the court will schedule a sentencing hearing in the next 3-4 months.  We will provide investors with notice of the hearing date once it has been scheduled.

Receiver’s Sixth Application for Attorneys’ Fees and Fourth Application for Accountants’ Fees

A.  Cotten Wright, Receiver, has filed an application for compensation for the period of October 1, 2017 through December 31, 2017 to Grier Furr & Crisp, PA. The application for  compensation seeks approval of $17,906.00 in fees and reimbursement of expenses of $142.49, for a total of $18,048.49.  The Receiver has also filed an application for compensation for the period of October 1, 2017 through December 31, 2017 to Middleswarth, Bowers and Company, LLC, accountants for the Receiver.  That application seeks approval of $360.75 in fees and reimbursement of $13.80 in expenses, for a total of $347.55.  Regardless of any fees and expenses that may be allowed by the Court, payment of any approved fees and expenses shall be limited to 30% of net recoveries.

If you do not want the Court to approve the applications noticed herein, or if you want the Court to consider your views, then on or before February 6, 2018, you or your attorney must do the following: (1) file a written response explaining your position with the Court; (2) mail, fax or email a copy of your response to the Receiver; and (3) attend a hearing on your response, if the Court schedules a hearing.

If you or your attorney do not take these steps,  the Court may decide that you do not oppose the relief the Receiver requests and may enter orders approving the applications for compensation.

Attachments:

DCG- Sixth Application for Compensation GFC

DCG- Fourth Application for Compensation Bowers

DCG Notice of Applications for Compensation for GFC & Bowers

Richard Davis Accepts Plea Agreement

On January 12, 2018, Magistrate Judge David Cayer conducted a hearing on the Plea Agreement reached between the U.S. Attorney and Richard Davis.  Mr. Davis testified that he agreed to the terms of the Plea Agreement, and the plea was entered.  A link to the Entry and Acceptance of Guilty Plea appears below.  Once the Court has scheduled a sentencing hearing (likely three or more months after the plea hearing), investors will be notified of the date and time of that hearing.

The U.S. Attorney’s Office issued a press release following the hearing, and a link to that is provided below.

In addition to accepting Mr. Davis’s plea, Judge Cayer altered the conditions of Mr. Davis’s release on bond to eliminate electronic monitoring.  Mr. Davis will still be subject to travel restrictions that prohibit him from traveling outside the Western District of North Carolina absent advance permission from his probation officer.

Finally, the Court determined that the broad restrictions Mr. Davis’s contact with any potential witnesses or victims be modified.  Specifically, investor-victims who wish to have contact with Mr. Davis will be permitted to opt out of the protection provided by the restrictions provided they do so in writing.  However, Mr. Davis shall continue to be prohibited from having any communications regarding the facts and merits of his case with any victim or potential witness.

Acceptance of Plea Agreement 1-12-18

Davis R Plea Press Release