SEC Alleges Multi-Million Dollar D.C. Ponzi Scheme

The Securities and Exchange Commission filed civil charges against several individuals who allegedly operated a Ponzi scheme that defrauded Washington D.C. investors out of more than $27 million.  Garfield Taylor, along with several family members and friends, was charged with various federal securities law violations in connection with the scheme, which purported to engage in low-risk options trading.  The SEC is seeking permanent injunctive relief in the Complaint, along with penalties and disgorgement of ill-gotten gains along with pre-judgment interest.

According to the complaint, Taylor operated the scheme through two entities he controlled - Garfield Taylor Incorporated ("GTI") and Gibraltar Asset Management Group, LLC ("Gibraltar").  Investors were lured into investing with the companies through the sale of promissory notes that purported to pay above-average rates of return as high as twenty percent with little or no associated risk.  Taylor, who was not a licensed securities broker, even likened the investment strategy to some investors as similar to bank accounts insured by the Federal Deposit Insurance Corporation ("FDIC"). In total, more than $27 million was raised from approximately 130 investors, who were primarily middle-class residents and charitable organizations in the Washington, D.C. area.  However, in reality, Taylor did little trading, and when he did trade, made highly risky bets on naked options that resulted in substantial losses.  The majority of investor funds were instead used for non-trading purposes, including the payment of $12.5 million to existing investors in the form of purported returns.  Additionally, Taylor misappropriated investor funds for a variety of personal reasons, including the payment of private school tuition for his children.

The SEC also named three companies belonging to the other defendants as relief defendants for the purpose of seeking disgorgement with prejudgment interest of investor funds.  

A copy of the SEC Complaint is here.