Mother Teresa Pleads Guilty to Ponzi Scheme
I should probably have put quotation marks around Mother Teresa," but the risk of being sued by the real one seems pretty low at this point.
On July 16, Johanna Garcia pleaded guilty to conspiracy to commit wire or mail fraud, for which she faces up to 20 years in prison. According to the Miami Herald, this is the third guilty plea resulting from the actions of MJ Capital Funding, which operated out of a Pompano Beach strip mall and yet managed to steal almost $200 million. (The Herald notes that the entire strip mall is worth about $8 million, which I thought was a nice touch.)
MJ Capital claimed to be providing merchant cash advances," short-term business loans at high interest rates. It needed capital to provide the loans, of course, and solicited investors to provide the capital, promising high returns. But as you have certainly guessed, very little of that money was ever used for business loans. That also meant the company wasn't making money, and was keeping early investors happy by paying them with money coming from new investors. That's the hallmark of Ponzi schemes, which almost by definition cannot last forever and so should be high on any list of things not to do. And yet people keep doing them. See generally, Things That Fail: Ponzi Schemes, Water Escapes" (Nov. 19, 2020) (linking to many other examples of both).
In fact, the Herald reports that this Ponzi scheme was ramping up at the very same time other Ponzi schemers were being convicted in the high-profile 1 Global Capital case. That entity was also based in Florida (though apparently not in a strip mall), and was also offering merchant cash advances." Undeterred, Garcia and her cronies kept running the same scheme using the same term to describe it, apparently thinking they would get different results.
Speaking of marketing, NPR provides a helpful link to the now-archived MJ Capital website, specifically the About the Founder" page devoted to the story of Johanna Garcia. You will be surprised to learn that Ms. Garcia came from humble beginnings" to found her first business, MJ Tax Services and More, which became the parent company for many other MJ" entities, including not just MJ Capital Funding but also MJ Enterprise, MJ Realty, MJ Remodeling, and MJ Lounge (described as coming soon" but probably won't be). Yet despite owning and operating all these very different entities, Garcia also found time to give back to the community.
In fact, it was really all about the community, according to the website. She noticed that people in the community faced many obstacles, but fortunately, Johanna was there with a solution to help." Eventually, she began to collect a portion of the dividends for directing her clients in the right path, but she never did it with the intention to profit financially." No! The intent was to help the community. In fact, so strong was this intent that Johanna was often referred to as Mother Theresa' [sic] in her community." According to her bio, at least.
The bio also says that Johanna has never taken no' or can't' for an answer, which is a direct reflection of her client[s'] reviews" but a little ironic given the guilty plea.
Remarkably, Johanna's drive to help the community was so strong that she and her co-conspirators started a new Ponzi scheme [e]ven after MJ Capital got busted by the FBI in the fall of 2021," according to the Herald. They created at least five new entities (including New Beginning Capital Funding," which in a way is an accurate description) and stole over $3 million before that too flamed out.
NPR provides a nice detail on how MJ Capital came to the FBI's attention. In early 2021, someone created a website that had a similar URL but very different contents: specifically, it accused the company of running a Ponzi scheme. MJ Capital, which was in fact running a Ponzi scheme, not only continued to run it but sued the site's creator in federal court for defamation, thus making it even more likely that MJ Capital would come to the authorities' attention. A bold strategy, but also stupid.
Two of Garcia's associates are already serving time. Mother Teresa will be sentenced in September.
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