Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, April 12, 2012

SEC Charges "Social Capitalist" with Running Ponzi Scheme

The SEC charged Ephren W. Taylor II, a self-described “Social Capitalist,” with running a Ponzi scheme that targeted socially-conscious investors in church congregations.  The SEC also charged City Capital Corporation and its former chief operating officer, Wendy Connor, who along with Taylor received hundreds of thousands of dollars from investors in salary and commissions.

According to the SEC’s complaint filed in federal court in Atlanta, Taylor strenuously cultivated an image of a highly successful and socially conscious entrepreneur. He marketed himself as “The Social Capitalist” and touted that he was the youngest black CEO of a public company and the son of a Christian minister who understands the importance of giving back. He authored three books and appeared on national television programs, and promoted his investment opportunities through live presentations, Internet advertisements, and radio ads. For instance, Taylor conducted a multi-city “Building Wealth Tour” during which he spoke to church congregations including Atlanta’s New Birth Church and at various wealth management seminars.

According to the SEC, Taylor made numerous false statements to lure investors into two investment programs being offered through City Capital Corporation, where he was the CEO. Instead of investor money going to charitable causes and economically disadvantaged businesses as promised, Taylor secretly diverted hundreds of thousands of dollars to publishing and promoting his books, hiring consultants to refine his public image, and funding his wife’s singing career.

The SEC alleges that more than $11 million that Taylor and City Capital raised from hundreds of investors nationwide from 2008 to 2010 was used to operate the Ponzi scheme. Investor money was misused to pay other investors, finance Taylor’s personal expenses, and fund City Capital’s payroll, rent, and other costs. City Capital’s business ventures were consistently unprofitable, and no meaningful amounts of investor money were ever sent to charities.

The SEC’s complaint seeks disgorgement, financial penalties and permanent injunctive relief against City Capital, Taylor, and Connor as well as officer and director bars against Taylor and Connor.

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