A Bethesda, Md., investment advisor has been ordered to pay more than $27 million for operating a Ponzi scheme that targeted 130 middle-class investors in the Washington, D.C., area, the Securities and Exchange Commission announced Friday.
Garfield M. Taylor, CEO of Garfield Taylor Inc. and Gibraltar Asset Management Group LLC, conducted the scheme between 2005 and 2010. The firms and Taylor’s associate, Jeffrey A. King, and The King Group also were charged with fraud by the SEC.
Taylor pleaded guilty to criminal charges for the same scheme in March 2014 in the U.S. District Court of the District of Columbia and was sentenced to 13 years in prison and ordered to pay over $28.6 million in restitution.
For the civil SEC charges, Taylor has been ordered to pay $27.9 million in disgorgement of ill-gotten gains and interest. King was ordered to pay $302,121. Gibraltar Asset Management Group was ordered to pay $10.9 million, and The King Group, $80,000.
The SEC says Taylor lured primarily middle-class residents in his community who had little to no investing experience to invest in promissory notes issued by his two companies that engaged in purportedly low-risk options trading. Taylor urged investors to refinance their homes and use any available means to invest, including their personal savings and retirement funds.
He promised returns as high as 20 percent per year and falsely assured investors that their investments would be protected by a reserve account or that he would employ a covered call trading strategy that would not touch the principal amount of their investment, the SEC complaint says.
Instead, Taylor and his companies engaged in high-risk, speculative options trading and suffered massive losses. Taylor relied upon money from new investors to pay returns to earlier investors. The SEC’s complaint also says he siphoned off $5 million in investor funds to pay family and friends and for other personal uses, including $73,000 to the private school his children attended.