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A South Florida woman who was the former CEO of an investment firm has pleaded guilty for her role in a $190 million Ponzi scheme that defrauded multiple investors, authorities said.
Johanna Michely Garcia pleaded guilty to conspiracy to commit mail and wire fraud, the U.S. Attorney's Office for the Southern District of Florida said in a news release Tuesday.
Garcia, 41, from Broward, was the former Chief Executive Officer of MJ Capital Funding, LLC, which solicited funds from investors for merchant cash advances, or MCAs, a type of short-term financing typically used by small businesses.
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From October 2020 through August 2021, Garcia, Pavel Ramon Ruiz Hernandez, and others got investors to hand over funds by making false statements about how their money would be used for the MCAs, prosecutors said.
The company ended up making few loans and didn't earn anywhere near the profits it needed to pay investors their promised returns and as a result, Garcia started paying investors by running a large Ponzi scheme, prosecutors said.
Garcia began paying existing investors using new investor funds while misappropriating millions of dollars for her own personal benefit, and of the nearly $200 million raised, investors lost nearly $90 million.
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The FBI and Securities and Exchange Commission effectively shut down MJ Capital Funding in the fall of 2021, but Garcia, Ruiz Hernandez, and others began operating a new Ponzi scheme that was identical to the MJ Capital Funding criminal enterprise, prosecutors said.
Garcia led the new scheme up until her arrest and even after while she was in Bureau of Prisons custody.
Just like the MJ Capital Funding fraud, Garcia and her partners told victims that their money would be used to fund commercial loans, but the money raised was used to pay off previous investors, and fund Garcia and her coconspirators' lifestyles.
Ruiz Hernandez was charged in August 2022, pled guilty in April 2023, and was sentenced in September 2023 to just over nine years in prison, followed by three years of supervised release.
Garcia’s sentencing hearing is set for Sept. 20, where she faces up to 20 years in prison.
