U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25846 / September 22, 2023
Securities and Exchange Commission v. Nathalia I. Burgos, Case No. 23-cv-61818 WPD (S.D. Fla filed September 22, 2023)
Securities and Exchange Commission v. Steven A. Fernandez et. al., Case No. 23-cv-61816 (S.D. Fla filed September 22, 2023)
SEC Charges Additional Persons for Their Roles in a South Florida $196 Million Ponzi Scheme
The Securities and Exchange Commission today filed actions against four individuals, Nathalia I. Burgos, Christian A. Cuesta, Steven A. Fernandez, and Monica M. O'Mealia, for their roles in the alleged $196 million securities fraud perpetrated by MJ Capital Funding, LLC. The SEC's complaints against Burgos, Cuesta, Fernandez, and O'Mealia were filed in federal district court in the Southern District of Florida.
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 perpetrating a fraudulent securities offering and Ponzi scheme. An amended complaint was filed by the SEC on February 22, 2022. MJ Capital and MJ Taxes are currently under a court-appointed receivership.
According to the SEC's complaint against Burgos, the former vice president of MJ Capital, from at least December 2020 until August 2021, she solicited and raised at least $82,000 from 10 to 13 investors on behalf of MJ Capital and MJ Taxes. The complaint alleges that Burgos represented to investors that their funds would be used to make "merchant cash advance" loans to small businesses, and that in exchange, investors would receive monthly returns of 10% or more. In reality, as alleged in the complaint, MJ Capital was using new investor money to pay purported returns to existing investors in a classic Ponzi scheme fashion and company insiders were misappropriating and misusing investor funds. The complaint alleges that Burgos knew, or was reckless in not knowing, that her statements to investors were false because she had access to and control over MJ Capital and MJ Taxes' bank accounts and corporate credit card, which showed Ponzi-like payments and misappropriation. The complaint also alleges that Burgos personally misappropriated about $39,000 in investor funds.
The SEC's complaint against Cuesta, who was a former "board member" and sales agent of MJ Capital, alleges that from at least June 2020 until August 2021, Cuesta illegally acted as an unregistered broker while offering and selling MJ Capital and MJ Taxes' unregistered securities to the public. Specifically, as alleged, Cuesta and his team of more than 100 sales agents solicited and raised about $29.5 million from over 970 investors on behalf of MJ Capital and MJ Taxes. The complaint also alleges that Cuesta received about $1.96 million in commission payments from MJ Capital for these sales of securities, which were all paid out of investor money.
According to the SEC's complaint against Fernandez and O'Mealia, who are husband and wife, from at least August 2020 through August 2021, they both illegally acted as unregistered brokers while offering and selling MJ Capital and MJ Taxes' unregistered securities to the public. The complaint alleges that Fernandez and O'Mealia personally, and through their team of sales agents, solicited and raised at least $19.4 million from over 800 investors, and together received $1.8 million in commission payments from MJ Capital, which were all paid out of investor funds.
The SEC charges Burgos with violating the antifraud and securities registration provisions of the federal securities laws. Specifically, the complaint alleges that Burgos violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC charges Cuesta, Fernandez and O'Mealia with violating the securities and broker-dealer registration provisions of the federal securities laws. Specifically, that they violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The SEC seeks permanent injunctive relief, disgorgement plus prejudgment interest and civil penalties against Burgos, Cuesta, Fernandez and O'Mealia.
Without admitting or denying the allegations in the complaint, Fernandez and O'Mealia have consented to a settlement, subject to court approval, under which they will be enjoined from violating the charged provisions of the federal securities laws and ordered to pay, jointly and severally, disgorgement plus prejudgment interest of $755,017, and each a civil penalty of $75,000.
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.