MJ Capital Board Member Gets 9 Yrs For $190M Ponzi Scheme

MJ Capital Funding LLC board member Pavel Ruiz Hernandez has been sentenced to over nine years in prison for his involvement in a $190 million investment Ponzi scheme conducted through the Florida-based company.

U.S. District Judge Rodney Smith issued a sentence of 110 months in prison, along with an additional three years of supervised release, following Ruiz’s guilty plea earlier this year on one count of conspiracy to commit wire fraud.

The sentence exceeded the prosecution’s request of 108 months of incarceration. The prosecution argued in a sentencing memorandum that Pavel played a central role in the MJ Capital Ponzi scheme. He actively solicited investors, used his sales expertise and knowledge of multi-level marketing to amplify the damage to investors, and led a significant group of investment solicitors, paying their commissions from investor funds, according to prosecutors.

The government also revealed that after the Ponzi scheme was exposed, Ruiz maintained control of millions of dollars in investor funds in undisclosed accounts and depleted over $1 million during the receiver’s efforts to recover investor funds.

“Defendant took millions of dollars from innocent people,” prosecutors stated. “He continued to steal their money in the face of a criminal investigation and a civil investigation.”

Ruiz had requested a lighter sentence than the recommended guideline of 78 to 97 months. He cited his volunteer work with inner-city children and pointed fingers at MJ Capital CEO Johanna Garcia, whom he labeled the “mastermind of the fraud” in his sentencing memorandum.

Johanna Garcia, once hailed as Florida’s “Mother Teresa” for her assistance to businesses seeking short-term financing, was arrested last month for orchestrating the Ponzi scheme and fraudulently soliciting funds from investors to fund cash advances for small businesses. Prosecutors allege that Garcia and Ruiz deceived investors and recruited others to solicit additional investors, promising a 10% monthly return on raised funds.

Garcia was already facing a civil suit by the U.S. Securities and Exchange Commission (SEC) in 2021, which accused her of running a Ponzi scheme that garnered $200 million from thousands of individuals who believed they were investing in small business loans.

An investigation initiated by the SEC revealed a website registered to MJ Capital and a blog post that referred to Garcia as Mother Teresa, a reference to the Catholic saint. The post claimed she could “help hardworking individuals make money” and “secure the financing they need.”

The SEC secured a temporary restraining order, froze assets, and appointed a receiver.

In August 2022, the SEC and the U.S. Department of Justice filed simultaneous civil and criminal actions against Ruiz, alleging that he and his team of approximately 70 sales agents solicited and raised at least $46 million from over 5,100 MJ Capital investors, promising them monthly returns of 10% to 15%. Instead, MJ Capital used new investor funds to pay returns to earlier investors, according to the SEC.

The alleged scheme also led to a class-action lawsuit by MJ Capital investors, accusing Wells Fargo Bank of aiding and abetting the fraud by failing to follow its anti-money laundering policies, which would have prevented the alleged perpetrators from transferring money into Wells Fargo accounts via payment apps like Venmo and Zelle. The lawsuit resulted in a $26.6 million settlement between the bank and the investors.

As of now, there has been no response from an attorney representing Ruiz.

Ruiz’s legal representation comes from Michael Mirer of the Law Office of Michael Mirer PA, while the government is represented by Eric E. Morales and Marx Calderon of the U.S. Attorney’s Office for the Southern District of Florida.

The case is U.S. v. Ruiz Hernandez, case number 1:22-cr-20400, in the U.S. District Court for the Southern District of Florida.