Johanna Garcia claimed her merchant cash-advance business was so helpful to small businesses in Florida that she was like the Catholic saint Mother Teresa.
But to the 15,400 investors who sank $194.1 million into MJ Capital Funding, the lender Garcia launched with her partner, Pavel Ramon Ruiz Hernandez, it was simply a Ponzi scheme, federal investigators say.
Last week, Ruiz Hernandez, 29, of Broward County, was hit with federal wire-fraud charges in Miami. Garcia, who had been MJ Capital’s president and chief executive, had earlier been named in a civil suit brought by the Securities and Exchange Commission, which accused the operation of being a blatant fraud.
Messages left with attorneys for Ruiz Hernandez and Garcia weren’t immediately returned.
Investigators say the pair launched MJ Capital Funding and other related entities in 2020 with the promise that they were raising money from investors to lend to small businesses in need of short-term loans. They promised investors returns of 10% a month or 120% in a year.
The mix of altruism — the company’s website claimed Garcia, in her effort to help hardworking people make money, had been likened in her community to the Albanian nun Mother Teresa, who served the poor in Kolkata, India, for decades and won the Nobel Peace Prize before being canonized by Pope Francis — and high returns proved a hit. Within a year, the venture raised nearly $200 million from thousands of investors, the SEC said.
But federal prosecutors and the SEC say very little lending ever occurred. Most of the money was used to pay the salespeople who brought in investors and pay out earlier investors in the scheme, according to court documents. Millions more went into the pockets of the company’s founders, investigators alleged.
Prosecutors say Ruiz Hernandez funneled some $7.7 million into his own accounts which he used to buy luxury cars and invest in cryptocurrencies.
Eventually, some investors grew uneasy, and one anonymously created a website accusing MJ Capital of being a Ponzi scheme. The company filed a lawsuit moving to get the site taken down, claiming its business was entirely legitimate — something investigators say was a bald-faced lie.
In late 2021, an undercover FBI agent approached MJ Capital posing as an investor to collect evidence, according to court documents.
Garcia, who was initially sued by the SEC last year, has partially settled the case, agreeing to turn over assets for auction. She has not been charged criminally.
Ruiz Hernandez faces up to 20 years in prison if convicted of wire fraud charges. He was released last week on $250,000 bond.
Source: https://www.marketwatch.com/story/she-called-herself-the-mother-theresa-of-florida-small-businesses-lending-but-investigators-say-she-was-really-running-a-194-million-ponzi-scheme-11662568859?siteid=yhoof2&yptr=yahoo