|08/28/2023||MJ Capital CEO charged by DOJ|
|11/15/2022||MJ Capital ceo to consent w/ SEC|
|03/28/2022||MJ Capital case up to 9,000+ investors|
|03/19/2022||Auction of MJ Capital personal property|
|10/08/2021||MJ Capital had > 5,000 investors|
MJ Capital Funding Discussed
MJ Capital Funding is Not Coming Back
Former MJ Capital Funding CEO Johanna Garcia is expected to consent to judgment with the SEC without admitting or denying the claims, according to documents filed in the SEC case. As part of that she will have to disgorge ill-gotten gains, pay prejudgment interest thereon, and incur a civil penalty. The total amount is to be determined.
At last tally, the Receiver said it had received more than 10,000 claims and is busy verifying all of them. MJ Capital raised nearly $200M from investors.
Criminal charges have finally been introduced to the MJ Capital Funding ponzi scheme saga. Last week, 29-year-old Pavel Ramon Ruiz Hernandez was charged by federal prosecutors with Conspiracy to Commit Wire Fraud. According to the allegations, Hernandez helped manage the operations of MJ Capital and oversaw significant fundraising efforts for the company while knowing that the business was a ponzi scheme. All told, it’s alleged that he and his co-conspirators defrauded investors out of $42 million.
MJ Capital Funding pretended to be an MCA provider but did not actually operate an MCA business, nor was the company known within the MCA industry.
Much of the investigations have focused on Johanna M. Garcia, the CEO of the company, but to date she has not been criminally charged.
If Ruiz Hernandez is convicted, he faces a maximum penalty of 20 years in prison, the DOJ states. The MJ Capital ponzi scheme is reported to have affected over 9,000 investors.
An amended complaint filed last week by the SEC against MJ Capital Funding, LLC et al. revealed a shocking new assessment, that the alleged ponzi scheme attracted more than four times the amount of investors originally believed. With more than 9,000 investors now accounted for, the number has continued to shoot up since the case was first filed last August.
Between them all, MJ Capital collected $194.1M in investor funds, the amended complaint states. $56M of it was allegedly misused through payments made to various entities, “a substantial portion of which represent payments to sales agents for promoting the investments in the MJ Companies.” Another $64M was paid back to investors as purported returns from the company’s business operations.
Those operations were minuscule, the SEC claims. MJ Capital is alleged to have only allocated $872,000 towards the line of work it claimed to be operating in.
Possessing the hallmarks of a classic ponzi scheme, the SEC further said that “the only way the MJ Companies could honor their obligations to investors would be by successful continuation of their fraudulent scheme. Once the supply of new investors was exhausted, the MJ Companies would be unable to pay the promised returns to existing investors.”
An auctioneer is being introduced into the MJ Capital saga to auction off surrendered personal property related to the scheme. Given how large the alleged ponzi was ($200M+), the value of the personal property at stake hardly reaches the same level of excess.
The inventory so far only includes:
- 1 2018 Mercedes Benz CLA 250
- 8 Watches (6 Rolex, 1 Michelle, 1 Gucci)
- 1 Gucci Backpack
- 2 Purses (Luis Vuitton and Christian Dior)
- 1 Louis Vuitton Bag
- 3 rings
- 1 pair of earrings
Additional property could be added, court records indicate. The date, time, and location of the auction has not yet been decided.
The second interim report, filed by MJ Capital’s Receiver, offered some discouraging news for investors holding out hope that the business had been legitimate all along. That is if it can even be determined who all the investors are.
“No such comprehensive investor list was located in the books and records of the Receivership Defendants,” the Receiver stated.
To date, it is believed that there were more than 5,500 total investors who invested more than $200 million altogether. The Receiver says that it has already received estimated loss claims of $150 million.
The challenge with so large a figure is that the business only has $11 million on hand even after cash has been recovered and third parties have surrendered assets. In companies comparable to what MJ Capital purported to be, a recovery of investor capital would be made possible by the gradual collection of customer receivables as the portfolio was wound down. MJ Capital, in alleged ponzi fashion, did not even have a portfolio.
What little business it did have on its books, appears to have been falsified, the Receiver states.
“The Receiver’s ongoing investigation continues to indicate that many of the MCA agreements are forgeries where the supposed customer never signed any document and never received from or paid to the Receivership Defendants any money.”
Many of the affected investors placed their life savings into MJ Capital, the Receiver has learned.
The SEC and MJ Capital’s former CEO, Johanna Garcia, are scheduled to attend Court-ordered mediation on February 28, 2022.
Ever since the SEC sued MJ Capital Funding, LLC in August, more information has been revealed about the potential size and scope of the alleged fraud. It was originally estimated that between $70M – $129M was raised by MJ Capital from over 2,150 investors. But now with access to the books and records, investigators believe it is much much higher.
“From the Receiver’s preliminary investigation, it appears that at least 5,500 investors were induced by Johanna Garcia and over 400 promoters to invest as much as $200,000,000 in this Ponzi scheme,” Court filings state.
If true, that would likely make it the largest fraud in the industry’s history. And it’s been a mess trying to recover the funds, it seems.
“Though several individuals have agreed to return funds and other assets to the Receiver, many others have not, and several continue to mislead the victims by counseling them not to register their claims on the Receiver’s website and advising them that the Receivership Defendants’ business will reopen and that is how they will be repaid.”
The loyalty that many investors feel towards MJ Capital’s former CEO is evident by the raw number of signatures attached to a Change.org petition to offer her sympathy and support. 3,243 names say they support her and her mission to unfreeze the money, which is not going to happen.
Those impacted appear confused as to why the company is in trouble in the first place simply because checks were still being sent out to investors at the time the SEC action took place.
The Receiver says that it’s because MJ Capital “had little in the way of actual MCA business, and could not possibly sustain the promised repayments to investors plus the ‘referral fees’ to promoters. Rather, they were paying these amounts with funds raised from new investors, in classic Ponzi scheme fashion.”
In other words, the checks were bound to stop coming eventually, because there was no actual underlying business.
The alleged fraud is now so large that the SEC has asked the Court for time to file an amended lawsuit. The judge has given them until February to file the documents.
Investigations carried out by the Receiver for Pompano-based MJ Capital Funding, have revealed that the number of investors in the alleged ponzi is more than double than originally believed.
In August, the SEC successfully persuaded a judge to place MJ Capital in Receivership after providing a convincing argument that the company was engaged in an active securities fraud and that the assets should be preserved. At the time, the SEC estimated that there were as many as 2,150 investors and that the amount raised ranged somewhere between $70M and $129M.
Now with better access to the internal workings of the business, the Receiver says that there are actually more than 5,000 investors and that they expect this number to increase, according to recent court filings.
Also revealed is that more than 400 individuals were tasked with recruiting investors.
“While MJ Capital claimed to use investor funds to provide small business loans called Merchant Cash Advances, the Receiver’s investigation to date has revealed virtually no evidence of legitimate business activity involving the funding and collection of Merchant Cash Advances which proceeds could have funded the payments to investors,” the Receiver said in official papers.
The case is ongoing.
More than 3,200 people have come out in support of MJ Capital Funding’s CEO, believing that she is also a victim in what has befallen the company.
MJ Capital Funding investors holding out hope that a return to business as usual could be in the cards for the company accused of being a ponzi scheme, might find that outcome a little less likely.
The Receiver has agreed to auction off all of the assets at the company’s Pompano Beach offices on September 28, and everything must go, from the 60″ TV to the garbage cans to the houseplant.
Such powers afforded to the Receiver, a law firm partner named Corali Lopez-Castro, also gives her the ability to enter into binding legal agreements on behalf of the company, the latest ones being Consent Agreements with the SEC. In doing this, the two MJ companies (MJ Capital Funding, LLC and MJ Taxes and More Inc.), have agreed to disgorge of “ill-gotten gains,” accept a civil penalty, and be permanently restrained from continuing its former business. Such an arrangement is standard fare when companies are thrust into forced Receiverships like this one. The Receiver’s job will be to collect as much money as possible so that it can be distributed to afflicted investors.
The MJ Capital Funding Website has also been shut down. It now forwards to law firm Kozyak, Tropin, Throckmorton. Regular updates on the case are available for free at: https://kttlaw.com/mjcapital/.
The consent orders do not apply to former CEO Johanna M. Garcia individually, who lost control of the company and ability to act on the company’s behalf when it was placed into Receivership.
An astounding 3,160 people have signaled their support for Garcia in this case. That’s the number of signatures on the online petition for her located on change.org.
“Our goal with this petition is to get those funds unfrozen as soon as possible,” it says. “This is Johanna’s desire as well proving once again Johanna’s unwavering support for us and in building a strong team and community. Johanna has helped countless amounts of people and charities with the work she does local and worldwide.”
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