SEC Charges Florida Man for His Role in $196 Million Ponzi Scheme
Litigation Release No. 25490 / August 30, 2022
Securities and Exchange Commission v. Pavel Ruiz, Case No. 0:22-cv-61609 (S.D. Fla filed August 29, 2022)
The Securities and Exchange Commission today announces charges against Pavel Ruiz, a former board member and top sales agent for MJ Capital Funding, LLC, for his role in an alleged $196 million fraud perpetrated by the company.
The SEC previously charged MJ Capital and an affiliated company, MJ Taxes and More, Inc., and their principal officer, Johanna M. Garcia, on August 9, 2021 for allegedly engaging in a fraudulent securities offering and Ponzi scheme. MJ Capital and MJ Taxes are currently under a court-appointed receivership.
According to the SEC's complaint against Ruiz, which was filed in federal district court in the Southern District of Florida, from at least June 2020 until August 2021, Ruiz and his team of about 70 sales agents solicited and raised at least $46 million from over 5,100 MJ Capital investors. The complaint alleges that Ruiz and his sales team represented to investors that their money would be used to make small business loans called "merchant cash advances," and that in exchange, investors would receive monthly returns of 10% to 15%. In reality, according to the complaint, Ruiz knew, or was severely reckless in not knowing, that MJ Capital was using new investor money to pay purported returns to existing investors in a classic Ponzi scheme fashion. The complaint further alleges that Ruiz misappropriated or misused about $6.5 million of investor money, a portion of which he spent on various personal expenditures. In addition, the complaint alleges that Ruiz's sales team received at least $5.3 million, and Ruiz directly received another $292,000, in commission payments from MJ Capital for promoting these investments.
The SEC's complaint, filed on August 29, 2022, charges Ruiz with violating the antifraud, and securities and broker-dealer registration provisions of the federal securities laws. Specifically, the complaint alleges that Ruiz violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 15(a) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Ruiz consented to a bifurcated settlement, subject to court approval, under which he will be enjoined from violating the charged provisions of the federal securities laws. The court will determine the amount of monetary relief upon future motion of the SEC.
In a parallel action, the U.S. Attorney's Office for the Southern District of Florida today announced criminal charges against Ruiz.
The SEC's investigation, which is continuing, is being conducted by Raynette R. Nicoleau and Julia D'Antonio in the Miami Regional Office, and supervised by Chedly C. Dumornay, Fernando Torres, and Glenn S. Gordon. The SEC's litigation is being led by Stephanie Moot under the supervision of Teresa Verges.