She said she had worked miracles – not for charity, but for profit: Johanna M. Garcia connected investors with companies that needed short-term financing, promising strong returns on their silver. But federal prosecutors say it was no miracle; it was a lucrative Ponzi scheme.
The Florida woman is accused of perpetuating a $196 million fraud through MJ Capital Funding LLC, the company she started in the Fort Lauderdale area. His company received this large sum of money from more than 15,400 investors in just over a year, from June 2020 to August 2021, according to federal investigators.
The MJ Capital website said Garcia was “often referred to as ‘Mother Theresa’ in her community.” He describes his ability to help ordinary people generate wealth and provide small business loans through a tool known as a “merchant cash advance” or MCA. The website is no longer active; It is archived online.
But instead of backing small businesses, according to the Securities & Exchange Commission, MJ Capital siphoned off millions of dollars from company insiders and used new investments to back bogus monthly “returns” of 10% – a rate 120% annualized.
How people were convinced to invest money
Garcia’s company has promised to use the money to make MCA loans to businesses it has carefully vetted. For potential investors, he described the process as “the purchase of future receivables” – guaranteeing them a share of the earnings of the recipient companies for months to come.
In reality, MJ Capital used funds from new investors to make payments of millions of dollars to satisfy existing investors and fuel a Ponzi scheme, according to the SEC. Additionally, according to the agency, company insiders have spent millions of dollars on items such as travel, luxury goods and clothing.
The SEC also alleges that MJ Capital used unlicensed brokers and sales agents to sell unregistered securities. According to the authorities, support for the program was Pavel Ruiz29, a member of the board of directors of MJ Capital whose sales team of some 70 agents is said to have raised at least $46 million from more than 5,100 investors.
Ruiz has reaped big rewards from his work, allegedly taking in $292,000 in commissions. But he also diverted some $7.7 million directly to his personal accounts or those he controlled, according to the SEC. He says he used some of the money to “buy crypto assets and a luxury vehicle.”
The SEC has filed its first complaint against Garcia last year – leading a federal judge to freeze his companies’ assets and order them in receivership.
But just Last weekthe SEC has filed a second complaint, this one against Ruiz. And on the same day, the U.S. Attorney’s Office for the Southern District of Florida announced criminal charges against Ruiz, accusing him of conspiracy to commit wire fraud. He faces up to 20 years in prison if convicted.
An undercover FBI agent visited the company
The alleged scheme showed signs of unraveling in April 2021, when someone created a website with a URL similar to MJ Capital’s – but which publicly accused the company of running a Ponzi scheme. MJ Capital then took the extraordinary step of suing the site’s creator in federal court, demanding a jury trial for defamation.
Two months later, an undercover FBI agent came to MJ Capital’s office in Pompano Beach, Florida, posing as a potential investor. The agent gave the company $10,000, which told them it would generate a guaranteed return of 10% for the next 12 months.
Garcia’s name does not appear in the criminal case against Ruiz; she is referred to only as “co-conspirator 1”, identified as the head of the company. When NPR asked the U.S. Attorney’s office if Garcia could also face criminal charges, a rep said Monday, “Per DOJ policy, we can neither confirm nor deny that an investigation exists.”
Last week, the SEC and Garcia agreed to a partial settlement that would essentially put the agency’s complaint against her on the back burner. They jointly asked Judge Raag Singhal to approve the deal, citing potential complications from what Garcia called a “parallel federal criminal investigation.”
The proposed wording of the order accepting the partial settlement states that “the SEC may pursue its claim for monetary relief after the criminal conviction has been completed (in the event that the defendant does not prevail at trial).”
The SEC says it has also reached a partial settlement with Ruiz similarly deferring the monetary relief issue, citing the criminal charges against him.