was filed in the United States District Court, Southern District of Florida on August 9, 2021, claiming that defendant Johanna M. Garcia ran a Ponzi scheme using her companies and co-defendants, MJ Capital Funding, LLC and MJ Taxes and More, Inc., to trick investors into believing they were funding loans to small businesses, when in reality, the investors’ “returns” were funded with money obtained by new investors.
The SEC alleges that since June 2020, Defendants solicited investments representing that investor funds would fund small business loans called “Merchant Cash Advances” and that annual returns to investors would be approximately 120%. Investors would enter into written loan agreements, despite Defendants not registering the securities with the SEC, and would receive “returns” funded by investment money from new investors or would defer the “returns” by entering into renewed agreements. In or around June 2021, an undercover agent for the FBI posed as a prospective investor and entered into investment contracts, which eventually lead to the scheme’s collapse. Based on the SEC’s investigation, they allege that defendants received between $51.1 million and $67.2 million in investor funds which were misused and misappropriated as “returns” to new investors, payments to sales agents for promoting the scheme, and cash withdrawals by Defendants.
The SEC further alleges that in or around April 2021, an individual registered a domain name similar to the one used by Defendants for their scheme, which alleged that Defendants’ operation was a Ponzi scheme. In an attempt to cover-up the scheme, Defendants filed a complaint against the individual in the United States District Court, Southern District of Florida, Case No. 21-cv-60841-AHS, which the SEC alleges included several misrepresentations about their business and its operation. That case is currently stayed by request of the Receiver appointed for the Defendant entities in the SEC matter.
Based on this scheme, the SEC alleges violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a)m 77e(c), and 77q(a); and Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Exchange Act Rule 10b-5, 17 C.F.R. § 240.10b-5. The SEC also claims alternative violations of Exchange Act Section 20(a), 15 U.S.C. § 78t(a) for Garcia’s direct and indirect control of the entity defendants and several liability for their collective violations of Exchange Act Section 10(b) and Rule 10b-5.