Investors Allege Wells Fargo Aided and Abetted Ponzi Scheme

Posted on September 3rd, 2021 at 2:10 PM
Investors Allege Wells Fargo Aided and Abetted Ponzi Scheme

From the Desk of Jim Eccleston at Eccleston Law:

A group of investors have filed a proposed class-action suit accusing Wells Fargo Bank of aiding and abetting a multimillion-dollar Ponzi scheme operated by merchant cash advance lender MJ Capital Funding LLC. 

According to the complaint, MJ Capital investors Gilmer Bautista, Juan Mendoza and Alejandro Diaz allege that Wells Fargo had knowledge both of the purported business of MJ Capital and of their actual transactions in the bank’s accounts, which exposed that client funds were not being used to make loans to small merchants. The Securities and Exchange Commission (SEC) filed a complaint against Johanna Garcia, MJ Capital and MJ Taxes in August 2021, which accused the defendants of conducting a “classic Ponzi scheme”, commingling client funds and paying earlier investors with funds from newer investors. 

According to court records, the U.S. District Court for the Southern District of Florida granted the SEC’s emergency motion for a temporary restraining order (TRO) while freezing Garcia’s and her companies’ assets. The MJ companies raised at least $70.9 million from nearly 2,150 investors across the country since June 2020, according to the complaint. The complaint alleges that banking regulations required Wells Fargo to “know its customer” and to implement and enforce a due diligence program in order to oversee the accounts for suspicious transactions. Despite “unambiguous signs” of a fraudulent scheme, Wells Fargo failed to further scrutinize Garcia and relevant MJ accounts, according to the complaint. 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, wells fargo, ponzi scheme

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