Federal authorities are investigating an Akron-area hedge fund, Davian Capital Advisors, that claimed to manage as much as $200 million that earned high double-digit returns, according to a lawsuit, an investigative journalism organization and lawyers familiar with the case.
No charges have been filed. The U.S. Attorney’s office in Cleveland declined to comment.
Davian Capital has turned over records that include computer hard drives to the U.S. Attorney’s office and to the Securities and Exchange Commission, said a lawyer representing the firm.
“We made some hard drives available so they could make copies,” said Orville Reed II of Fairlawn law firm Stark & Knoll Co. “I can’t comment on the objective of the investigation. I don’t know what it is. Are there going to be charges filed? I have no idea.”
Davian Capital is cooperating with the investigations, Reed said.
The nonprofit Southern Investigative Reporting Foundation, which was founded in 2012 and specializes in financial journalism, published a lengthy online report on Monday about Davian Capital and its founder and principal, Anthony Davian.
The story in part says that the fund “had come to a standstill after being besieged by fraud allegations from all directions” and that investors “suffered sharp losses.” The full story can be found online at http://sirf-online.org.
Davian was not available to comment. While Reed said he represented the firm, not Davian, he said it was not in Davian’s best interests to comment publicly.
Ex-worker is sued
Davian Capital is suing a former employee, Sean-Michael Kvacek of Chagrin Falls, in Summit County Common Pleas Court alleging that Kvacek took trade secrets and other confidential information and gave them to “third parties for use in gaining an unfair competitive advantage over the company.”
Kvacek was subject to a nondisclosure agreement, according to the suit. Davian Capital sought a temporary restraining order against Kvacek.
The lawsuit says Kvacek was hired in January as Davian Capital’s former director of investor relations and marketing and was fired on May 29.
Kvacek, through his attorney, James Ickes in Kent, filed a motion last Friday to seal future filings and exhibits in the lawsuit.
“The basis of this motion is that the subject matter of the instant action is significantly related to an ongoing federal investigation into [Davian Capital] and Plaintiff’s principal, Anthony Davian,” the document reads. “Allowing the information to be part of the public record could jeopardize an ongoing federal criminal investigation and frustrate potential law enforcement action against [Davian Capital] and/or Mr. Davian.”
Ickes did not return a call Wednesday seeking comment.
The federal inquiries started shortly after June 3, when Davian Capital filed its suit against Kvacek, Reed said.
“I thought it was funny this thing hit after we filed our suit,” Reed said. “It looks awful coincidental.”
Investors concerned
The investigative story and the news of the federal investigations could mean the end of Davian Capital, Reed said.
“It’s the kiss of death for the operation whether it is true or not,” Reed said. His office is getting calls from people seeking the money they invested with the fund, he said.
Davian, 34, filed paperwork with the SEC in 2008 indicating he intended to raise as much as $250 million to start up the hedge fund. Offices at that time were at 240 Woodhaven Drive in Copley. He heavily promoted himself via social media, including Twitter, Facebook and YouTube.
Davian described his business as a global alternative investment firm that used two hedge fund strategies. The firm’s website says Davian founded the business in 2007 out of a small home office and currently offers “three hedge fund strategies,” the Cleveland Pure Alpha Fund, Cleveland Gravity Fund and Cleveland Precious Metals Fund.
He also published a newsletter, the Davian Letter, which charged $69 to $99 a month for a subscription. The Davian Letter promoted itself online saying an investor can “Easily earn +23% annually with our hedge fund long/short trading system.”
The firm said its target clients were “high net worth individuals” and institutions. Public records do not indicate how many clients Davian Capital had or if the firm ever managed as much as $200 million.
Hedge funds are typically defined as private investments that take large risks and can utilize unorthodox strategies. Investors often are required to take substantial positions in a fund and share profits with the fund owner.
Davian Capital in May announced it had moved into offices at 4650 Streetsboro Road in Richfield.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com