UPDATE: Garfield M. Taylor, Charged Civilly By SEC In 2011, Now Indicted On Criminal Charges In Alleged Ponzi Scheme

ponziblotterGarfield M. Taylor, the Maryland man accused civilly by the SEC in November 2011 of duping charitable organizations and people of faith in a Ponzi scheme, now has been indicted on criminal charges, the FBI and federal prosecutors in the District of Columbia said.

Taylor, 54, of Rockville, faces counts of wire fraud, securities fraud and selling unregistered securities, the office of U.S. Attorney Ronald C. Machen Jr. said.

The $25 million Taylor scam was about smoke and mirrors, prosecutors said.

From a statement by Machen’s office (italics added):

According to the indictment, Taylor devised and employed a scheme from in or about September 2006 through in or about September 2010 in which he convinced investors to invest with him by promising them substantial returns on their investment, telling them that he used a sophisticated securities trading strategy that protected against loss, and claiming that he had a proven track record of using this strategy effectively.

During the course of this scheme, however, Taylor never used the trading strategy that he told investors that he would use. With the investments he did make during this period, Taylor either lost money or made minimal profits far below what was needed to pay the amounts he owed. The only way that Taylor was able to pay the substantial interest rates he was paying during this period was to use portions of the principal invested by new investors to pay amounts that were owed to earlier investors.

In 2011, the SEC said Taylor used terms such as such as “proprietary strategy,” “covered call investment strategy” and “unparalleled downside protection” to dupe investors. It is somewhat common for fraudsters to use fancy-sounding investment lingo in bids to scam investors.

In one instance, federal prosecutors said today, Taylor took “approximately half” of an investor’s $425,000 investment to pay sums owed to “earlier investors.”

He also claimed investments with him were insured against loss and that a reserve fund to protect investors existed as an extra safeguard, prosecutors said.

Those claims were false, prosecutors said.

“At the time of the scheme’s collapse, Taylor owed investors nearly $25 million just to cover the principal he was contractually required to return to them,” prosecutors said.

The U.S. Attorney’s Office in the District of Columbia also prosecuted the AdSurfDaily Ponzi scheme.

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