She called herself Mother Teresa of Florida lending to small businesses, but investigators say she really ran a $194 million Ponzi scheme

Johanna Garcia claimed her cash-advance merchant business was so beneficial to small businesses in Florida that she like the Catholic saint Mother Teresa.

But for the 15,400 investors who poured $194.1 million into MJ Capital Funding, the lender Garcia started with partner Pavel Ramon Ruiz Hernandez, it was just a Ponzi scheme, federal investigators say.

Last week, Ruiz Hernandez, 29, of Broward County, was indicted on federal fraud charges in Miami. Garcia, who was president and CEO of MJ Capital, was previously named in a civil suit filed by the Securities and Exchange Commission that accused the operation of being a clear fraud.

Messages left with attorneys for Ruiz Hernandez and Garcia were not immediately returned.

Investigators say the couple started MJ Capital Funding and other related entities in 2020 with the promise that they were raising money from investors to make loans to small businesses in need of short-term loans. They promised investors returns of 10% per month or 120% per year.

The combination of altruism – the company’s website claims that Garcia, in her efforts to help hardworking people make money, has 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 the high returns proved to be a hit. Within a year, the venture had raised nearly $200 million from thousands of investors, the SEC said.

But federal prosecutors and the SEC say there were very few loans. Most of the money was used to pay sellers who introduced investors and paid off previous investors in the scheme, according to court documents. Other millions went into the pockets of the company’s founders, investigators said.

Prosecutors say Ruiz Hernandez funneled about $7.7 million into his own accounts, which he used to buy luxury cars and invest in cryptocurrencies.

Eventually, some investors became alarmed and an anonymous person created a website accusing MJ Capital of being a Ponzi scheme. The company sued to take down the site, claiming its business was completely legitimate — something investigators say was a blatant lie.

In late 2021, an undercover FBI agent approached MJ Capital posing as an investor to gather evidence, according to court documents.

Garcia, who was originally sued by the SEC last year, partially settled the case by agreeing to auction off assets. She has no criminal record.

Ruiz Hernandez faces up to 20 years in prison if convicted of fraud charges. He was released last week on $250,000 bail.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *