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MJ Capital Funding News: SEC Alleges $70 Million Ponzi Scheme

Aug 23, 2021 Ponzi schemes

The SEC has filed a complaint alleging CEO Johanna Garcia and her two Florida companies – MJ Capital Funding LLC and MJ Taxes and More Inc. – operated a Ponzi scheme that misappropriated funds from investors. According to the SEC complaint, Garcia and her companies raised somewhere from $70 million to $128.8 million from more than 2,150 investors. Garcia allegedly raised these funds through an unregistered offering. Companies that plan to raise money from investors must register with the SEC or file for an exemption.

Garcia’s promises of huge returns on unregistered offerings should have raised alarm bells with brokers. Brokers who recommended shares of MJ Capital Funding to their investors may have failed to perform their due diligence. Kurta Law wants to speak with investors who lost money through MJ Capital Funding. 

MJ Capital Ponzi Scheme Allegations

On August 13, 2021, the SEC filed an emergency action in an attempt to stop Garcia’s alleged Ponzi scheme. In a Ponzi scheme, the fraudulent business pays its investors’ returns using money raised from new investors. This allows a business to maintain the illusion of profitability without generating a return on investments.

The SEC alleges that Garcia stated her companies would use investor money to fund small business loans called Merchant Cash Advances (MCAs). As early as June 2020, MJ Capital offered investors an agreement to pay annual returns for six to 12-month investments. Both MJ companies typically promised their MJ Capital “partners” returns of around 120%.

MJ Capital Loans: Too Good to Be True?

MJ Capital Funding’s web presence paints a very different picture than the SEC. The website advertises merchant loans with quick approvals, fast funding, and flexible terms. Unlike a bank loan, these loans require no collateral and have flexible credit requirements. These easy loans are supposedly possible thanks to a “pipeline of investors.” The website’s blog about MJ Capital CEO Johanna Garcia states, “Johanna has always been known as a hardworking woman that has had her priorities in line. Johanna will always put her family and friends first. She is often referred to as ‘Mother Theresa’ in her community.”

The SEC alleges that MJ Taxes and MJ Capital rarely fulfilled the promises made by their marketing materials. Except for a few rare instances, the SEC alleges MJ Capital Funding did not use investor funds 3to make MCAs, and the MJ companies earned very little revenue. According to the SEC, MJ Capital and MJ Taxes did not make nearly enough revenue to pay the returns they promised investors. In addition to paying investors using new investors’ money, the companies also allegedly convinced existing investors to defer the repayment of their principal investments.

Where Did the Money Go?

The SEC alleges that from June 1, 2020, through April 30, 2021, MJ companies misused investor funds and made payments totaling approximately $27.4 million to various entities. MJ companies also allegedly used investors’ money to make payments on loans owed by MJ Taxes.

MJ Capital Lawsuit

When a website questioned MJ Capital’s claims of 120% returns, MJ Capital sued its creator. The lawsuit stated that MJ Capital had ''lost profits from merchants/investors who were steered away from doing business with MJ Capital....” The SEC describes several statements in the suit as “materially misleading.” This includes the statement that the business “maintains a small number of investors.” According to the SEC, MJ Capital had more than 2,000 investors. As in any Ponzi scheme, MJ Capital Funding allegedly needed to continually acquire new investors to stay afloat.

What Can Investors Do Now?

The SEC seeks to compel MJ Capital Funding to return its ill-gotten gains to investors and has ordered a freeze of Johanna Garcia’s assets. If Garcia and her companies cannot repay the money, investors who worked with FINRA-registered brokers should try to recover their money through arbitration. Contact the FINRA lawyers at Kurta Law for a free case evaluation. Call 877-600-0098 or email info@kurtalawfirm.com.