On August 5, 2009, following a raid by the Special Inspector General of the Troubled Asset Relief Program (SIGTARP) and suspension by the Federal Housing Administration from issuing FHA mortgage loans and Ginnie Mae mortgage-backed securities, it ceased business operations.

[2] On August 3, 2009, SIGTARP special agents raided the company's headquarters in Ocala, Florida, in connection with an investigation related to the company's acquisition of a majority stake in Colonial BancGroup, once one of the 25 biggest depository banks in the U.S.[3] Taylor, Bean & Whitaker had signed a deal on March 31, 2009, to become the majority owner of Colonial BancGroup in a $300 million equity stake.

[4][5] On August 5, 2009, Taylor, Bean & Whitaker ceased business operations, and terminated all of its approximately 2,000 employees at its headquarters.

[7] Both companies were brought down by a fraud that started in 2002 involving individuals at both Colonial Bank and Taylor, Bean & Whitaker.

[10] PricewaterhouseCoopers has maintained in court documents that its responsibility is to follow accounting principles — which might not necessarily detect fraud.

But in a pretrial brief issued by the trustee, former PricewaterhouseCoopers chairman Dennis Nally is quoted in a 2007 Wall Street Journal article saying that the "audit profession has always had a responsibility for the detection of fraud".

Ocala was a conduit which purchased its home loans, and bundled them into securities which it then sold to Freddie Mac and other investors.

[15][20][21] Sweet held that the units, acting as brokers in the sale of the Ocala notes, owed "no duty ... to investigate or verify representations" made in a private placement.

When the overdrafts grew to over $100 million, mid-level Taylor Bean executives sold Colonial BancGroup $1 billion in mortgages that it did not own.

[8] Colonial BancGroup's materially false financial data included overstated assets for mortgage loans that had little to no value.

[28] The company's former chief executive and lead manager for Ocala Funding (Paul R. Allen, who admitted to allowing $1.5 billion in collateral to be misappropriated from Ocala and was sentenced in 2011 to 40 months in prison, followed by two years of supervised release) and treasurer (Desiree Brown, who was sentenced to six years in prison) pleaded guilty and cooperated in the case against Farkas, and other executives received sentences ranging from three months (senior financial analyst Sean Ragland) to eight years (Catherine Kissick, senior vice president and head of the Mortgage Warehouse Loan Division at Colonial Bank, Federal Bureau of Prisons inmate #77945-083, released on 30 August 2018).