SEC Charges Floridian, 2 Companies in Merchant Cash Advance Ponzi Scheme

The Securities and Exchange Commission (SEC) has filed an emergency action and obtained a temporary restraining order, an asset freeze, and the appointment of a receiver to stop an alleged Ponzi scheme and misappropriation of investor proceeds perpetrated by Coral Springs, Florida resident Johanna M. Garcia and two entities she controls.

According to the SEC’s complaint, filed in federal court in the Southern District of Florida, over the past year Garcia and her companies raised at least $70 million from more than 2,150 investors in a fraudulent securities offering. The complaint alleges Garcia, and companies MJ Capital Funding LLC and MJ Taxes and More Inc. told investors that offering proceeds would be used to fund merchant cash advances to small businesses and promised investors annual returns of 120-180 per cent.

The reality was quite different. Garcia and her companies only made, at most, $2.9 million in loans and earned little revenue. Instead, the defendants allegedly used at least $20 million of new money to pay purported returns to existing investors in a classic Ponzi scheme fashion. The complaint alleges the defendants misused another $27.4 million of investor money by making payments to various other entities, a substantial portion of which represented payments to sales agents for promoting these investments.

“As alleged in our complaint, Garcia and her companies lured unsuspecting investors with false claims and promises of triple-digit annual returns,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “We continue to caution investors to be wary of any investment that promises returns that are too good to be true.”

The SEC’s complaint, filed on Aug. 9, 2021, and unsealed last week, charges the defendants with violating the antifraud and registration provisions of the federal securities laws. In addition to the emergency relief, the complaint seeks preliminary and permanent injunctions; disgorgement, prejudgment interest, and a civil penalty from each of the defendants; and an officer and director bar against Garcia. The court set a hearing for Aug. 25 to determine if a preliminary injunction should be entered and whether the asset freeze should remain in force for the duration of the litigation.

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