Huge Broward Ponzi Scheme CEO Pleads Guilty to 190M Fraud

Johanna Michely Garcia MJ Capital FundingPhoto byOCMM

South Florida Woman Charged in $196 Million Ponzi Scheme Targeting Hispanic Community

Fort Lauderdale, FL. - Johanna Michely Garcia, 42, the former CEO of MJ Capital Funding, LLC, based in Pompano Beach, Florida, has been charged with conducting an investment Ponzi fraud scheme totaling approximately $190.7 million. The indictment alleges that from about October 2020 to August 12, 2021, Garcia, Pavel Ramon Ruiz Hernandez, and others fraudulently solicited money from investors purportedly to fund MJ Capital Funding, LLC’s merchant cash advances (MCAs).

MJ Capital Funding, LLC, operated by Garcia, presented itself as a legitimate financial services company. The firm specialized in Merchant Cash Advances (MCAs), a type of short-term financing for businesses. MCAs involve providing funds to merchants in exchange for a percentage of their future credit card sales.

The Modus Operandi
MJ Capital Funding, LLC offered MCAs, a short-term financing typically used by small and medium-sized businesses. Garcia and her co-conspirators solicited funds under the pretense of investing in MCAs. Instead, they used new investor money to pay off earlier investors, enriching themselves while deceiving investors about the true nature of their investments. The scheme resulted in nearly $90 million in losses for investors.

The Unraveling of the Scheme
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. In August 2021, the SEC brought Ponzi scheme charges against MJ Capital Funding, LLC, its primary owner Johanna M. Garcia, and related investment entities. The SEC alleges that Ms. Garcia used MJ Capital Funding, LLC, and the related entities to raise a large amount of money from more than 2,000 investors.

The Aftermath and Consequences for Victims
After the FBI and SEC shut down MJ Capital Funding in the fall of 2021, Garcia continued her fraudulent activities by launching a new Ponzi scheme under different business names. This new scheme mirrored the operations of MJ Capital Funding, deceiving victims with similar false promises.

The Receiver has recovered $16.6 million, of which $7.5 million was obtained through voluntary surrender and turnover. The Receiver anticipates disbursing at least $19.5 million to victim investors. However, the total loss to investors is nearly $90 million, indicating that many victims will not be fully compensated for their losses.

The Legal Consequences
If convicted, Garcia faces a maximum penalty of 20 years for each conspiracy, money laundering, and mail fraud count and ten years for each money laundering charge. A federal district court judge would determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Going Forward
The case of MJ Capital Funding shows the risks associated with investment schemes promising high returns. It underscores the importance of due diligence and skepticism when approached with investment opportunities that seem too good to be true. As the legal proceedings continue, the victims of this massive Ponzi scheme await justice and some form of financial recovery.

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Research and source materials:

https://www.justice.gov/usao-sdfl/pr/former-company-ceo-charged-alleged-mj-capital-funding-llc-ponzi-scheme

https://www.funderintel.com/community/revenue-based-financing/mj-capital-ceo-indicted-on-190-million-ponzi-scheme

https://www.sec.gov/enforcement-litigation/litigation-releases/lr-25168

https://www.ponziblog.com/2021/09/new-complaint-sec-v-mj-capital-funding-llc-et-al/

https://kttlaw.com/case-studies/mj-capital-funding/

https://www.bbb.org/us/fl/pompano-beach/profile/credit-card-merchant-services/mj-capital-funding-llc-0633-90594606/details

https://ecf.flsd.uscourts.gov/cgi-bin/ShowIndex.pl