Sean Murray: So there's a company called MJ Capital Funds.
This story is literally pretty fresh. Yeah. Like just happened.
Johny Fernandez: Just happened in like the last 20 minutes.
Sean Murray: Yeah, we found out about in the last 20 minutes. So
there's a company down in South Florida called MJ Capital and MJ
Capital was just charged by the Securities and Exchange
Commission with committing a very large Ponzi scheme. So the
charges are securities fraud. And it's alleged that the owners
took or the owner owners I'm not sure exactly, they allege they
put one person.
Johny Fernandez: They put one person's name.
Sean Murray: One person's name, and it's alleged that she took
in between what was it 70 to $120 million from investors in
under one year's time. And what she claimed she was doing with
the money was that she was making MCA's and small business
loans. So we went to the website, we checked them out
online, right before we came on. Yep. Right. And it looked like
you're run of the mill shop that we would normally report on,
business lender MCA, we buy future receivables we'll fund
your business, all that stuff, right? It's everything like
normal. Yeah. As far as that we could tell. Yeah. Right. We went
to the Instagram, went to the Twitter.
Johny Fernandez: Everything looks legitimately normal.
Sean Murray: Yeah, like this wasn't a company that was like,
where you didn't know who the owners were, you know, super
shady, you couldn't reach them, they seem to be like, embedded
with like charities and stuff. And, you know, there it seemed
they were very public facing. That was the impression I got
from looking at it. And lo and behold, according to the SEC,
they weren't really putting money into deals. In fact, the
SEC said they only took they only used 2.9 million of the 100
some odd million they collected to actually fund businesses. And
that the rest went other places, right, to different bank
accounts, entities controlled by the owner, paying like broker
commissions and so forth, wasn't exactly made clear where all the
money went, or how much is still there. It did mention something
about cash withdrawals that the owner was using to taking some
money out of the ATM. I don't know how you take 100 million
out of the ATM.
Johny Fernandez: To backtrack real quick regarding the story
down in South Florida. For those who don't know, what exactly is
a Ponzi scheme, and what what is a Ponzi scheme?
Sean Murray: Okay, yeah, that's a good question. What is a Ponzi
scheme, it's one thing to of lead somebody's running a Ponzi
scheme, you know what what the heck is a Ponzi scheme, all
right, so a Ponzi scheme is when you're taking money from new
investors to paying back old investors. So in a Ponzi scheme,
you're not actually investing the money, so to speak, you're
giving the illusion that the money that's been invested is
earning a return. The problem is that at some point, you're gonna
have to prove it, right. Because if you're the first investor in
a Ponzi scheme, let's say you put in 100 grand, and you were
promised that your 100 grand has earned 20 grand, at some point,
you're gonna be like, That's awesome. I'll take my 120k right
now, right. And if you don't want the scheme to blow up right
out of the gate, well, you're gonna have to come up with 120k
as proof that everything worked, even though you didn't do
anything with the money, or you tried and it failed, or
whatever, right. So what you do in a Ponzi scheme is you then
raise money from new investors and say, hey, I'll borrow, you
know, I'll raise 500k from you, I'll take a million from you,
I'll take 100k from you, right. And then you take from that
money, you take 120k, and you give it to the first person,
they get their 120k. It serves as proof that this that
everything is legitimate, because the first guy got paid
out his initial investment, plus a nice hefty return. And now all
these other people are like, whoa, did you hear so and so
turned his 100k into 120k, and they got paid out, it's legit,
this person is not going to steal your money. But that money
was taken from the other investors. The problem is, those
investors are also expecting a nice hefty return on their
money, but 120k of it just went out the door. So now that money
now there's a shortfall, and she's promising, or he's
promising a return on the actual amount, so now she's got to come
up with even more for when those people want to cash out. So
she's going to use proof of the first person getting paid out to
convince other people to invest. And so you bring in other
people, and when these people want to get paid out and take
money from them, they pay out these people, and you keep going
up and up and up and up and up, up the chain. And then the way
that you can try to prevent a a Ponzi scheme from folding is
that you convince people not to cash out, you tell them there's
a penalty for cashing out. You tell them that you're going to
reinvest their money and make even more money, you have to do
everything in your power to prevent them from cashing out
because the Ponzi scheme will collapse a lot quicker, hence,
made off, made off was if you pull your money out, you can
never come back in. Yeah. And why was that? Because he
couldn't afford to have anyone pull out because the whole
scheme would start to unravel. Yeah. So everyone's got to keep
the money in because it's a fraud. Right. And there's no
actual business.
Johny Fernandez: Yeah, and I think we were reading according
to the legal documents you know that this was all uncovered when
someone decided to number one ring the alarm, but then also an
undercover informant decided to invest some money in and see
Sean Murray: Oh, yeah, that's that was kind of a twist in all
what it was all about.
this right so.
Johny Fernandez: The undercover FBI agent.
Sean Murray: Undercover FBI. So how did this all come? How did
Johny Fernandez: How many people?
this all even come out? Because this company raised more than
100 million or between 7, 70 and $120 million in under a year.
How did it how did it? How did it collapse? How do they get
found out? That's the first thing we wondered. Yeah. Right.
Because I just explained to you how it works. So someone alleged
Sean Murray: Allegedly, allegedly. These are
that this company was a Ponzi scheme in a very public way. The
company that was sued MJ Capital, then sued the person
alleging they were a Ponzi. And they won the lawsuit. They won
the lawsuit and, and shut out the person who was making the
allegation. And so they came out victorious, almost almost like,
allegations, more than 2000 people invested more than 2000
you know, as further proof that this was not a Ponzi. At some
point, though, the FBI was following along and they
strolled into the into the office twice, they first came
in, and like it said, like in June this past June, this
literally just recently happened. And they pretended to
be an investor. And the reason we're telling you all this, is
because guess what these type of offers occur out there all the
time, she was raising money for syndication. Hello, if you were
investing in MCA, or you know deals or business loans, or
whatever and they're going to tell you, you're gonna get a
nice return on your investment, pay attention to what we're
telling you. He was promising between 120, 180% returns
annually, which that number is not uncommon to be thrown around
in the MCA industry. So they weren't even outrageous compared
to what other people would say. Not that you can expect to
really make that amount, but it wasn't out of control. Someone
else might look at that number and look around and see other
people kind of throwing out similar numbers. And this
company was able to raise $100 million dollars in syndication
money, right, look legit, everything looks fine, right?
They they even won a lawsuit said that they were in a Ponzi
scheme. But they were a Ponzi scheme. Right. And what did they
do with the money? They didn't make any deals, they funded 2.9
million of the worth the 100 million so on money, 100 million
some odd dollars that they collected FBI, went in there
undercover, pretended to be a syndicate, the FBI pretended to
be an MCA syndicator. And they said I want to put in. Yeah, so
first they came in and say I want to put this. Yeah, I want
to put in 10k I want to put 10k into deals. She was like, all
right, put you into deals. So FBI actually became a syndicate
in the Ponzi scheme, watch the money not do anything. Then they
came back a second time and did it again. Right. And so now,
then they got a firsthand glimpse as to what was actually
happening and not happening. And I assuming that they recorded
all these encounters. Right. So this MCA syndicate was really
the FBI. And just in the last week, the SEC shut down MJ
Capital alleged it to be a Ponzi scheme. And yeah, I mean, it's
the the the consequences, and the collateral damage, are only
beginning to be felt as people just start to find out because,
you want to know how many people she tricked?
syndicates invested in this fake, allegedly fake, MCA
company that looks like a legit company.
Johny Fernandez: This was all in a year period.
Sean Murray: All in a year. Pay attention people. Be be wary of
your syndicates, if you're doing, if you're up to no good,
right, but also don't start a Ponzi scheme. And if you're a
syndicate pay attention to who you're investing in.
Johny Fernandez: Well, and I think what's interesting is
like, according to the legal documents, again, these are the
allegations, and the fact that everything played out, you know,
she or they decided to protect themselves to continue to make
sure they look legitimate after you know, being sued after other
people saying hey, like they're fake. And then after an FBI
undercover FBI person comes in does the deal with them, you
know, they pretty much were able to ride that out until, you
know, the last couple of days where things blew up. So it's
definitely gonna be interesting to see how this will play out.
Sean Murray: Yeah, this is this is really up there in terms of
the scale of of the alleged fraud. Yes. I think a another
another big one that happened down there was a company called
One Global Capital and if I'm not mistaken, that was that was
more or less a Ponzi scheme and the size of that one was around
300. I think around $300 million.
Johny Fernandez: Do you know, do you remember what the time
length of them being in business?
Sean Murray: A lot longer than this one.
Johny Fernandez: I find it interesting that within a year
period.
Sean Murray: Yeah. This is the thing this is an insane amount
of money to raise in one year.
Johny Fernandez: In one year. Yeah.
Sean Murray: Yeah, for it to not be real, the fact that they were
able to raise, you know, close to 100 million or more, they
Johny Fernandez: This is a great example. Yeah. Yeah.
said up to 120 million, they're not even entirely sure. Right,
in a year's time is absolutely incredible. The next largest
scheme that I know of in that area was One Global Capital. I
Sean Murray: Look what happens more than 2000 people invested
think they had raised like, 300 some odd million dollars, I
think, what was the total amount, and this was done, that
was done over like, like seven years or something, here's
into this in a year. That's ridiculous.
Johny Fernandez: And out of all years, so that's technically.
someone, here's someone who went out and raised $100 million in a
Out of all years. From 2020 to 2021. This all.
year, made $2.9 million worth of deals, and then operated like a
Ponzi scheme, allegedly, you know, from what from what we're
being told, it's just insane. If you're being offered, you know,
these, these high rates of return 120% ,180%, syndicate,
MCA Business Loan, blah, blah, blah, be very, very, very
careful and cautious. A lot of people are not not truthful
about what they're doing. And they even might have good
intentions in the in the beginning. But they're just
terrible managers of money. They don't know what they're doing.
There's a proper way to do MCA, MCA syndication, you have to
follow securities' laws. If you do it, there needs to be a
securities attorney involved. If you're gonna offer syndication
if it just some person saying yeah, I'll invest in deals. I'll
give, you a note, give you a big return blah, blah, blah. I mean.
Sean Murray: Yeah, I just, it just, it's, it's so upsetting,
because, you know, not that we're responsible for killing
people, right? But. But this is, it's a scam, a legit scam. It's
a legit scheme that has played out so many times before. And to
see so many people rush rush to get it.
Johny Fernandez: And I think this goes back to one of the
earlier videos that we did was that yes do your due diligence.
You have to really do your due diligence when you're making a
deal. Doesn't matter what type of deal, it doesn't matter where
you are, on the ladder, how many years of experience if you don't
do your due diligence, as a business owner, as a client,
etc. This is where you end up losing a ton of money.
Sean Murray: Yeah, do your due diligence and doing due
diligence isn't looking at their Instagram profile.
Johny Fernandez: We did that. And it was legitimate, like she
was working with like local charities, local community
organizations, that you're like, wow.
Sean Murray: They had a website, a YouTube channel. They had, you
know, they were involved with charities, they were public
facing, they weren't hiding in some shady back office or
whatever, that made it look legit. By the way, that is not
due diligence. That's something we do to just talk about on a
show. You need to do real things like look at their financials,
go through their systems, find out who's auditing the platform
that the money's being invested on. That's due diligence, do not
look at your social media and say, this looks legit to me,
because that's how they intentionally are trying to fool
you. Yeah. I'm pretty, I'm mad.
Johny Fernandez: No, I, I think, I think the one thing that
baffles me is that, like you said, this is we've seen this
time and time and time again, and some people just don't learn.
Sean Murray: They don't learn. I hope you learn now. For any of
you out there who are, you know, thinking about syndicating or
investing in deals, you got to be extremely, extremely,
extremely careful. Because, you know, this had happened so many times.
Johny Fernandez: And it will continue to happen.
Sean Murray: It will continue to happen.
Johny Fernandez: Just however long we're on this earth.
Sean Murray: You know, for like reporters and stuff it's great
because it's news, but I feel bad for all the people who were affected.
Johny Fernandez: Yeah, absolutely.
Sean Murray: It's a shame