Religion News Blog — A self-described “social capitalist” who has appeared on national TV talk shows was charged on Thursday with fraud by the U.S. Securities and Exchange Commission for an alleged $11 million Ponzi scheme that targeted socially conscious churchgoers.
The SEC said Ephren Taylor II fraudulently sold $7 million of notes, said to bear 12 percent to 20 percent annual interest rates, to fund small businesses such as laundries, juice bars and gas stations.
It said Taylor, 29, also raised $4 million by selling “sweepstakes” machines loaded with casino-style games, with promised returns of 72 percent to 2,400 percent per year. The SEC said Taylor’s company, City Capital Corp, would promise to donate some revenue to charity.
In reality, according to the complaint filed in Atlanta federal court, Taylor diverted money to promote his books, hire image consultants, fund his wife’s singing career a nd pay bi lls.
The SEC said Taylor had touted himself as the youngest black chief executive of a public company, and the son of a Christian minister who emphasized the importance of “giving back.”
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It said he had conducted a multicity “Building Wealth Tour” in which he spoke to congregations such as the New Birth Missionary Baptist Church in Lithonia, Georgia, and appeared on TV programs such as “The Montel Williams Show” and “The Big Idea with Donny Deutsch.”
Last October 10 members of the New Birth Missionary Baptist Church in the Atlanta suburb of Lithonia sued their pastor, the controversial ‘bishop’ Eddie Long, for encouraging members of the church to invest in the scheme.
Their lawsuit says the “church marketed, sponsored and hosted ‘Wealth Tour Live’ seminars in October 2009.” The suit says that the 10 investors together lost $1 million, and contends that Eddie Long and New Birth church used their “confidential/fiduciary relationship” to “coerce” the church members into investing with Ephren Taylor. The suit is ongoing.
What has been uncovered so far appears to be “widespread fraud,” said attorney Jason Doss, who represents the plaintiffs. “If you speak to our clients, they were very active in their church and put a lot of weight in what Bishop Long said. He [Taylor] touted himself as a teenage entrepreneur and prodigy. The types of investments he peddled were supposed to be socially conscious. He used all the bells and whistles and terms that would attract a church-going person.”
An attempt to seek comment Thursday from Long was met by a response from New Birth. In a statement, the church said: “Although this has been a very difficult process for all involved, we have always remained faithful that Ephren Taylor and City Capital Corporation would be held accountable for their actions in this matter. We are prayerful that they will move swiftly to do the right thing and heal and restore all those who have been harmed by their actions.”
Last year, Long made an unusual video that was posted on YouTube on behalf of several members who he said faced financial hardships because of investments that went awry.
Long urged Taylor and the company to “do what’s right” and return the invested money with interest.
Eddie Long is a leading proponent of the so-called Prosperity Gospel.
In a Ponzi Scheme existing investors are paid from funds obtained from new investors, rather than from the promised return of whichever venture the investors thought they were investing in.
This pyramid scheme was named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s.
The U.S. Securities and Exchange Commission says affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are – or pretend to be – members of the group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme, by convincing those people that a fraudulent investment is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraudster’s ruse. These scams exploit the trust and friendship that exist in groups of people who have something in common.
Examples of affinity fraud (articles)
You Won, Now Give It Back: How Ponzi schemes work (article)
Ponzi’s Scheme: The True Story of a Financial Legend (book)
What is a Ponzi Scheme? (article)
You Can’t Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work… and Why They’re More Common Than Ever (book)
Religion-based scams take Lord’s name in gain (article)
Affinity Fraud: How To Avoid Investment Scams That Target Groups U.S. Securities and Exchange Commission (article)