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Tuesday, May 28, 2024 | Back issues
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$11 Million Ponzi Man Disappeared, SEC Says

ATLANTA (CN) - Ephren Taylor, who called himself the youngest-ever black CEO of a publicly traded company - City Capital Corp. - disappeared after he "operated a Ponzi scheme to swindle over $11 million, primarily from African-American churchgoers," the SEC claims in Federal Court.

The SEC sued City Capital Corp., Ephren Taylor II and City Capital's former COO Wendy Jean Connor.

Taylor, 29, was City Capital's CEO and chairman until October 2010, when he resigned.

"His current whereabouts are unknown," the SEC says. He did not respond to the SEC's investigative subpoenas.

"Self-proclaimed 'social capitalist' and former CEO of City Capital Corporation ('City Capital'), Ephren W. Taylor II ('Taylor'), operated a Ponzi scheme to swindle over $11 million, primarily from African-American churchgoers," the complaint states. "Taylor promoted two distinct, fraudulent offerings. First, he sold promissory notes issued by City Capital and various affiliates, bearing annual interest rates of 12 percent to 20 percent, telling investors their funds would be used to purchase and support various small businesses - such as laundry, juice bar or gas station - that City Capital had identified as good opportunities for the investors. For the second offering, Taylor sought the assistance of City Capital's Chief Operating Officer, defendant Wendy Jean Connor ('Connor'), in selling 'sweepstakes machines,' basically computers loaded with various games, many of which resembled those found at casinos. Taylor claimed the sweepstakes machines would generate investor returns of as much as 300 percent or more in the first year. To tap into the investors' largest source of available funds, Taylor encouraged investors to roll-over retirement portfolios to self-directed IRA custodial accounts, which he facilitated, and then invest those funds with Taylor and City Capital.

"In reality, City Capital never generated significant - if any - revenue from actual business operations, but instead was wholly dependent upon a continuous stream of new investor funds just to stay open. Investor funds supposedly targeted for specific investments were used to pay unrelated expenses, including 'returns' to other City Capital investors, salaries and commissions to City Capital executives and employees, and payroll, rent and other basic operating expenses at City Capital's various affiliates. When new investor funds dried up during the latter half of 2010, the entire operation ground to a halt, leaving hundreds of swindled investors."

The SEC says Taylor lured investors by marketing himself as "the social capitalist" and "the son of a Christian minister who understands the importance of 'giving back,'" and by denigrating traditional investment instruments such as mutual funds and the stock market.

Taylor promoted his company to church congregations, in Internet and radio ads, and on TV shows, including "the Montel Williams Show," according to the complaint.

The complaint states: "After starting the sweepstakes machine offering in late 2009, Taylor and City Capital launched websites specifically promoting these investments. One of these websites, sweepstakesincome.com, described the investments as 'the

brainchild of self-made millionaire Ephren Taylor' and featured Taylor's lengthy dissertation about 'How You Can Create a Zero-Maintenance, Residual Income Using the Sweepstakes Empire!'

"Taylor also touted the sweepstakes machines on radio stations across the country. He purchased air time - typically in weekly blocks - from over 30 stations. These stations collectively played Taylor's one-minute advertisement several thousand times. The ads repeated many of the same false claims about the sweepstakes machines, detailed below."

The SEC claims Taylor and City Capital raised at least $7 million from promissory notes issued to investors around the country and used some of the money to pay for Taylor's personal expenses, including book promotions, credit card bills, car payments, rent and his wife's music career.

It claims Taylor rarely repaid the notes in full, and concealed City Capital's cash flow problems. And it claims that Taylor and City Capital falsely told investors that the sweepstakes machines did not involve illegal gambling and that they could generate returns of 72 percent to 2,400 percent per year.

The SEC seeks monetary penalties, disgorgement, and injunctions.

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