Screenshot of Johanna Michely Garcia of MJ Capital Funding, who was sentenced to 20 years in prison on Tuesday for her Ponzi scheme.
Source: MJ Capital
A Florida woman was sentenced to 20 years in prison Tuesday after pleading guilty to participating in a nearly $200 million Ponzi scheme.
The woman, 41-year-old Johanna Garcia of Broward County, received maximum possible sentence one count of conspiracy to commit wire fraud and mail fraud. Court documents in U.S. District Court in southern Florida show that 28 other counts in her indictment were dismissed.
Judge Jose Martinez also sentenced Garcia to three years of supervised release and a $100 special assessment, as well as additional restitution to be determined March 3, according to the docket.
Federal prosecutors said in a news release that Garcia controlled MJ Capital Funding, which fraudulently solicited investors to fund its alleged business of providing short-term, high-cost loans known as commercial cash advances (MCAs).
Prosecutors said she and her co-conspirators made “false and fraudulent representations” to investors about the nature of their investments and the use of their funds.
Investors were told that their money would be used to fund MCA and that the return on their investment would be paid out of profits from MCA’s business. The indictment alleges that Garcia and her co-conspirators falsely promised huge returns of 120 percent annually.
But prosecutors said in a press release on Tuesday that her company “made few loans and failed to earn anywhere near the profits needed to pay promised returns to investors.”
“As a result, Garcia paid investors by operating a massive Ponzi scheme, using new investor funds to pay existing investors while embezzling millions of dollars for his own personal benefit.”
This fraud conspiracy occurred between October 2020 and August 2021, and Garcia made at least US$190.7 million. Prosecutors said investors lost nearly $90 million of that total.
In 2021, investors in MJ Capital filed a lawsuit alleging Wells Fargo Facilitating a fraudulent scheme by failing to comply with its own anti-money laundering policies. The bank agreed to settle for $26.6 million in March 2023, Law360 reports.
Garcia’s associate, Pavel Ramon Ruiz Hernandez, was charged in August 2022 and pleaded guilty in April 2023 to one count of conspiracy to commit wire fraud. He was sentenced in September 2023 to nine years and two months in prison, plus three years of supervised release.
Prosecutors said Tuesday that Garcia, Ruiz Hernandez and others launched a new, similar Ponzi scheme in the fall of 2021 after MJ Capital was shut down by the FBI and SEC .
Prosecutors said Garcia led the new scheme from the beginning “until her arrest (August 2023) and later while in Bureau of Prisons custody.”
The new scheme used entities such as New Beginning Global Funding LLC and New Beginning Capital Funding LLC, in which Garcia and her partners told investors they would fund business loans.
“In fact, the funds raised were used to repay previous investors and fund the lifestyle of Garcia and his co-conspirators,” prosecutors said.
In a Nov. 27 sentencing memorandum, Garcia’s attorneys said Ruiz Hernandez was, in fact, the true leader of the scheme. They also argued that her subsequent actions at New Beginnings “while grossly misleading and demonstrably wrong, were motivated by an attempt to reward previous investors.”
The U.S. Attorney’s Office refuted that claim in a memo filed Monday and urged the judge to sentence Garcia to 240 months in prison.
“The overwhelming evidence demonstrates that Garcia was the leader/organizer of two Ponzi schemes that defrauded more than 15,400 victims and resulted in actual losses of nearly $90 million,” prosecutors wrote.
Lawyers for the federal public defender’s office representing Garcia did not immediately respond to CNBC’s request for comment on the sentencing.
— CNBC’s Dan Mangan contributed to this report.
