How One Mom Made Nearly $200 Million Making Consumers Think She Was A Miracle Worker
A Florida mom is expected of running a $200 million Ponzi scheme where she led her consumers to believe she could work miracles.
This article is more than 2 years old
A Florida woman, who is often referred to as Mother Teresa in her community, has been charged with running a $196 million Ponzi scheme. Johanna M. Garcia is also accused of perpetuating fraud through MJ Capital Funding LLC – the company she started in the Fort Lauderdale area. According to federal investigators, the business collected money from about 15,400 people between June 2020 and August 2021 with a promise of a return on their investment.
While Garcia’s website boasts about her ability to help regular folks generate wealth and provide loans to small businesses using a tool called “merchant cash advance,” federal prosecutors say it was just a lucrative Ponzi scheme. (The site is no longer active and can be found archived online.) But instead of supporting small business owners, the Securities & Exchange Commission says, MJ Capital siphoned millions of dollars to company insiders and used new investments to prop up bogus monthly returns of 10% at an annual rate of 120%.
In hindsight, all the evidence screams Ponzi scheme, which makes one wonder how people were tricked into investing their money. It’s actually very simple. Disguised with fancy terms, Garcia’s company promised to use the money to make merchant cash advance (MCA) loans to businesses it carefully vetted. To prospective investors, her pith made it seem like they were purchasing future receivables that guaranteed them a share of the recipient businesses’ income for months to come. But she just used the funds to make millions of dollars in payments to satisfy existing investors and fuel a scheme.
Additionally, the Securities & Exchange Commission says Garcia’s company insiders spent millions of dollars on items like travel, luxury goods, and clothing. The SEC also alleges that MJ Capital used unlicensed brokers and sales agents to sell unregistered securities. Supporting the Ponzi scheme was 29-year-old Pavel Ruiz, MJ Capital board member whose sales team of around 70 agents allegedly raked in at least $46 million from more than 5,100 investors. For his efforts, Ruiz reaped large rewards and earned $292,000 in commissions, NPR reports.
This is not the first time Garcia’s business has come under scrutiny. Last year, the SEC filed its first complaint against her. This prompted a federal judge to freeze her company’s assets and order them into receivership. Then last week, the SEC filed a complaint against Ruiz. The move caused the U.S. Attorney’s Office in the Southern District of Florida to file criminal charges against him on grounds of conspiracy to commit wire fraud. If convicted for the Ponzi scheme, he faces up to 20 years of jail time.
Interestingly, Garcia’s “company” began to fall apart in April 2021 when someone created a website with a URL similar to MJ Capital. The site publicly accused the company of running a Ponzi scheme. In response, the firm took the extraordinary step of suing the site’s creator in federal court, demanding a jury trial on defamation claims. Two months later, an undercover FBI agent visited her office posing as a potential investor. The agent gave the company $10,000, which they were told would generate a guaranteed 10% return for the next 12 months.
When the U.S. Attorney’s Office was asked if Garcia might face criminal charges, a representative said, “Pursuant to DOJ policy, we can neither confirm nor deny the existence of an investigation.” It remains to be seen if victims of the Ponzi scheme will get any of their money back. However, the proposed wording of an order accepting a partial settlement says the SEC can address its request for monetary relief once criminal sentencing is concluded.
