She was called the Mother Teresa of Florida Small Business Loans, but investigators say she was actually running a $194 million Ponzi scheme.
By Lukas I. Alpert
MJ Capital Funding claimed to raise funds to lend to small traders, but prosecutors say most went to owners or were used to pay off previous investors
Johanna Garcia said her cash advance business was so helpful to small businesses in Florida that she looked like the Catholic saint Mother Teresa.
But for the 15,400 investors who invested $194.1 million in MJ Capital Funding, the lender Garcia launched with his partner, Pavel Ramon Ruiz Hernandez, it was simply a Ponzi scheme, according to federal investigators.
Last week Ruiz Hernandez, 29, of Broward County, was charged with federal wire fraud in Miami. Garcia, who had served as chairman and CEO of MJ Capital, had previously been named in a civil suit filed by the Securities and Exchange Commission, which accused the deal of blatant fraud.
Messages left with lawyers for Ruiz Hernandez and Garcia were not immediately returned.
Investigators say the pair launched MJ Capital Funding and other related entities in 2020 with the promise that they were raising funds from investors to lend to small businesses in need of short-term loans. They promised investors returns of 10% per month or 120% per year.
The Altruism Mix – the company’s website claimed that Garcia, in her efforts to help hard workers earn money, had been compared 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 yields were a hit. In one year, the company has raised nearly $200 million from thousands of investors, the SEC said.
But federal prosecutors and the SEC say very few loans have ever taken place. According to court documents, most of the money was used to pay sellers who brought in investors and to pay previous investors. Millions more went into the pockets of the company’s founders, investigators say.
Prosecutors say Ruiz Hernandez paid some $7.7 million into his own accounts which he used to buy luxury cars and invest in cryptocurrencies.
Eventually, some investors grew concerned and one anonymously created a website accusing MJ Capital of being a Ponzi scheme. The company has filed a lawsuit to have the site taken down, claiming that its activity is completely legitimate – which investigators say is an outright 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 initially sued by the SEC last year, partially settled the case, agreeing to put assets up for auction. She has not been criminally charged.
Ruiz Hernandez faces up to 20 years in prison if convicted of wire fraud. He was released last week on $250,000 bail.
-Lukas I. Alpert
(END) Dow Jones Newswire
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