MutualFundWire.com: A Fallen Fundster Gets Five Years In Prison

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Thursday, December 29, 2016

A Fallen Fundster Gets Five Years In Prison

A federal judge in the Midwest just sentenced a mutual fund industry entrepreneur to five years in prison.

David Blaine Welliver

The U.S. attorney's office for the District of Minnesota confirms that yesterday Senior U.S. District Judge Paul A. Magnuson of the U.S. District Court in St. Paul handed down the sentence to David Blaine Welliver, CEO and chief investment officer of the now-defunct Dblaine Capital [profile]. The judge also ordered Welliver to pay more than $2.16 million in restitution and to serve three years of supervised release after serving his five years in prison.

The Minneapolis Star-Tribune reported on the sentencing and notes that Welliver still owes the Minneapolis Police Relief Association and the Minneapolis Firefighters' Relief Association after losing a $14.6-million judgment in 2000 over fund asset mismanagement accusations.

On July 13, Welliver pled guilty to securities fraud for, in the words of the U.S. attorney's office, "defrauding investors in the Dblaine Fund of $1.725 million." He admitted to diverting more than $500,000 of a $4 million loan to Buffalo, Minnesota-based Dblaine Capital for his personal use and to investing $1.725 million from the fund into a shell company formed by principals of the company that made those loans to Dblaine. When the mutual fund faced big redemptions at the end of 2010, that shell company investment turned out to be worthless. Welliver was initially indicted on 14 counts (five of wire fraud, five of money laundering, and four of mail fraud) in August 2015.

Welliver founded Dblaine in 2005, and launched its first mutual fund, the Dblaine Fund in 2009 and used part of the loan mentioned above to buy assets of another fund. The Dblaine fund liquidated in 2011. Later in 2011 the SEC sued Welliver, accusing him of "flagrant and numerous" securities law violations, and Welliver and Dblaine in turn sued his former chief compliance officer.

"It's been a difficult journey," Paul Engh, Welliver's attorney, tells the Star-Tribune. "He's more or less lived out of a car the last 18 months and is relieved that it is over."

Printed from: MFWire.com/story.asp?s=55431

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