The former CEO of a South Florida business who ran a nearly $200 million Ponzi scheme has pleaded guilty to conspiracy to commit mail and wire fraud and is facing up to 20 years in prison. Johanna Michely Garcia, 41, of Broward County, was the president of MJ Capital Funding, LLC, created in 2020 and based in Pompano Beach, according to the indictment. The company purported to lend merchant cash advance loans, known as MCAs, to businesses in Florida and elsewhere in the country as an alternative financing option for small- and medium-sized businesses that needed quick funding.
Investors were told their money was used to fund the MCA loans and that they would receive about 10% per month in returns, an annual rate of 120%, the indictment said. In reality, MJ Capital funded few MCAs and “failed to earn anywhere near the profits it needed” to pay investors’ the promised returns and paid them back with new investors’ money. Garcia and her co-conspirator Pavel Ramon Ruiz Hernandez recruited people to solicit investors throughout Broward and Miami-Dade counties by paying them commissions, at least 10% of the amount they raised from investors, according to the indictment.
As Garcia continued seeking new investors, she and co-conspirators used the existing investors’ money to pay for personal expenses and luxury goods, cars, vacations, entertainment and her own personal investments. Garcia fraudulently received nearly $200 million from investors between October 2020 and August 2021, the indictment said. Throughout the Ponzi scheme, investors lost nearly $90 million, federal prosecutors said in a news release Monday.
The FBI and U.S. Securities and Exchange Commission shut down MJ Capital in the fall of 2021 , but Garcia, Ruiz Hernandez and other co-conspirators started a new venture under other business names to continue to raise money from new investors to pay off previous ones, according to a factual proffer, the facts agreed on by the defendant and the government.
Six South Florida companies accused of wrongdoing by SEC The new businesses were not in any Florida Division of Corporations records and raised between $3 and $4 million from about 20 investors to purportedly fund MCAs for general contractors building commercial and residential properties, the factual proffer said, but there was “little to no” loan activity, and the money was used to pay past debts. In September 2021, the SEC filed a series of lawsuits against six separate South Florida businesses, including MJ Capital. According to the SEC’s complaint, the company’s blog on its website said Garcia was referred to in her community as “Mother Teresa” for her ability to “help hardworking individuals make money.
” In April 2021, someone created a website with a domain name similar to the company’s actual website and alleged MJ Capital was leading a Ponzi scheme. MJ Capital filed a lawsuit against the person who made the website, and Garcia in court documents said the business “funds millions of dollars in merchant capital loans on a monthly basis.” “These allegations were problematic for MJ Capital, and it responded by posting on the website ‘a Response to False Claims by Unknown Individual.
’ Among other things, in the response, MJ Capital states that it ‘specializes in MCA’s’ without disclosing that it makes very few MCAS and that the vast majority of its business consists of raising money from investors,” the SEC’s lawsuit complaint said. Garcia entered the plea agreement on July 16 and will be sentenced in September, court records show. Ruiz Hernandez pleaded guilty last year and was sentenced to just over nine years in prison, followed by three years of supervised release, prosecutors said.
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