A North Bethesda man ran a Ponzi scheme that cheated investors in the Washington area, including charities, out of millions of dollars, the Securities and Exchange Commission said Friday.

Garfield M. Taylor told investors that they could earn annual returns of about 20 percent with little or no risk, and he showed one prospective client, a Baptist church, a fake letter of recommendation from the Charles Schwab brokerage firm, the SEC alleged.

Taylor was actually losing money on highly risky options trades and using funds invested by some clients to make interest payments to others, the SEC alleged in a civil lawsuit. The scheme collapsed last year, the SEC said.

From 2005 to 2010, investors put in more than $27 million, the SEC said. The SEC lawsuit did not say how much they lost overall.

Taylor, a former employee of mortgage giant Fannie Mae, diverted $5 million of clients’ funds for personal gain, the SEC said. Of that, $73,000 went to his children’s private school, the SEC said. He also made hundreds of thousands of dollars of unwarranted payments to family and friends, the SEC alleged.

Taylor could not be reached Friday, and the SEC said it knew of no lawyer representing him.

“Garfield Taylor and his partners in the scheme touted themselves as seasoned and trustworthy financial professionals offering a conservative but lucrative investment opportunity,” Stephen L. Cohen, associate director of enforcement at the SEC, said in a statement.

“In reality, they were gambling away investor assets in extremely risky trades and operating a classic Ponzi scheme,” Cohen said.

The SEC also sued Garfield’s businesses, Gibraltar Asset Management Group and Garfield Taylor Inc., which operated from an address on Wisconsin Avenue N.W. in the District, and five alleged collaborators, including a brother, a nephew and a childhood friend.

The Hillcrest Children’s Center, a Washington charity for impoverished single mothers and their children, sued Taylor in January, alleging that he and other defendants had lost or misappropriated almost all of the $8 million the center entrusted to them. The center said in its lawsuit that it was founded two centuries ago to aid children orphaned by the War of 1812.

In September, a court clerk declared Garfield in default in that suit, saying it appeared that he had not defended himself in the action. Mail sent to Gibraltar Asset Management Group was returned as undeliverable, according to court records.

Garfield’s more than 130 investors included many middle-class people spread across local communities such as Lanham, Germantown, Upper Marlboro and Alexandria, the SEC said. One investor put in almost his entire retirement savings of more than $780,000, the SEC said.

Citing his purported 20 percent returns, Garfield allegedly told an investor, “You can only imagine how much money we make.”

In 2010, Taylor’s businesses lost almost $300,000 on their trading while paying out $1.4 million to investors.

Though it was selling securities, Gibraltar Asset Management never registered with the SEC and did not give clients audited financial statements, the SEC said.

The case reflects an increased focus on Ponzi schemes at the SEC since Bernard Madoff’s investment fraud gave them heightened notoriety.