SEC Files Charges in $27M Washington DC Ponzi Scam
The Securities and Exchange Commission has charged Garfield M. Taylor and a number of his relatives and friends with running a DC-area Ponzi scam. The more than $27 million financial fraud targeted investors in the area.
Taylor and his partners allegedly defrauded about 130 investors between 2005 and 2010. The scam fell apart when the money dried up as a result of trading losses and the interest payments that were made to investors.
According to the Commission, Taylor convinced mainly middle-class clients to refinance their houses and use their money, including their retirement and savings, to invest in promissory notes that were put out by his two companies, which were supposedly taking part in low-risk trading options. He touted returns of up to 20% and provided investors with false assurances that their investments were protected by either a “covered call” trading strategy or a “reserve account.”
To keep new investor money coming, Taylor is said to have persuaded current investors and others to refer prospective clients to him in exchange for commission fees that were calculated according to how much the new investors put in. Although he is not a licensed securities broker, Taylor convinced a number of investors to give him access to their brokerage accounts and he used this privilege to make trades. He promised them a portion of the profits.
The SEC contends that contrary to his promises, Taylor actually was taking part in risky options trading, which then resulted in the financial losses. He also allegedly took $5 million to pay relatives and friends and cover his kids’ education.
Also charged with securities fraud bu the SEC (allegations against the parties vary, but include: violation of federal securities’ laws anti-fraud provisions, offering registration requirements, and broker-dealer registration requirements):
• Gibraltar Asset Management Group LLC
• Garfield Taylor Inc.
• Maurice G. Taylor. He is Taylor’s sibling and is Gibraltar’s chief investment officer
• Randolph M. Taylor. Taylor’s sibling who was Gibraltar’s VP of organizational development.
• Benjamin C. Dalley. He formerly served as VP of operations at Gibraltar.
• Jeffrey A. King. Taylor’s brother-in-law and Gibraltar’s former COO and President.
• William B. Mitchell. He was a senior executive at both companies
These individuals and entities, along with Taylor, are accused of jointly putting together a Gibraltar PowerPoint presentation that contained false and misleading statements and giving these to prospective clients. The SEC says the documents misrepresented the financial firm’s options trading strategy, the protections offered, the expected return rate, and degree of risk involved. Institutional investors and charities, including a Baptist church, were even pursued as prospective clients.
The SEC is seeking enjoinment from future violations, the payment of penalties, and disgorgement.
SEC Charges Perpetrator of Washington-Area Ponzi Scheme, SEC, November 18, 2011
More Blog Posts:
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011
SEC Charges Filed in $22M Ponzi Scam that Targeted Florida Teachers and Retirees, Stockbroker Fraud Blog, August 29, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011