Legal: SEC charges Florida man in $196M Ponzi scheme selling unregistered securities

The SEC is targeting a key figure in a $196 million Ponzi scheme that lured more than 15,500 investors with promises of outsized returns. 

Joel Castellanos, a resident of Tamarac, Florida, has been charged by the SEC with allegedly selling unregistered securities and operating as an unregistered broker on behalf of MJ Capital Funding, LLC and its affiliate MJ Taxes and More, Inc. The civil action, filed February 23 in the Southern District of Florida, alleges Castellanos personally and through a team of about 42 sales agents raised at least $25.2 million from at least 1,222 investors nationwide. 

The case stems from the collapse of the MJ Companies, which the SEC alleges were operated as a Ponzi scheme by their owner, chief executive officer and president, Johanna M. Garcia. From at least June 2020 until August 2021, the firms allegedly raised over $196 million through an unregistered fraudulent securities offering, telling investors their money would fund small business loans known as Merchant Cash Advances. Returns were pitched at annualized rates of 120% to 180%. 

In reality, according to the SEC, the MJ Companies made only about $923,000 in actual MCAs. The agency alleges that investor money was instead funneled into fictitious returns to existing investors, undisclosed commissions of at least $62.3 million to sales agents, and at least $7.35 million in personal spending by insiders on travel, entertainment, luxury goods and other items unrelated to the business. 

Castellanos allegedly served as an MJ Capital "board member" and led a multi-tiered sales operation. The SEC says he told investors their funds would be used for MCAs and that they would earn returns of 10% or more per month, plus the return of their principal at maturity. Investors were directed to send money to MJ Capital via wire transfers, checks, or cash. 

During the period in question, Castellanos and his sales team allegedly received about $6.4 million in commissions from MJ Capital. At least $130,854 went to Castellanos personally, the SEC says, including about $38,273 in checks and Cash App payments and about $92,581 in charges on the MJ Capital corporate American Express card. 

The SEC says Castellanos held no securities licenses at any relevant time, was not registered with the Commission, and was not associated with a registered broker-dealer. The securities sold by the MJ Companies were likewise not registered, nor did they qualify for an exemption. 

The agency is seeking a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. 

The action follows the SEC's 2021 emergency enforcement against the MJ Companies, which resulted in an asset freeze, injunctive relief, and the appointment of a receiver. Garcia was criminally indicted in August 2023 and pled guilty to conspiracy to commit wire fraud and mail fraud in July 2024. 

No final determination has been made in this case. 

For investment professionals, the matter is a pointed reminder that the SEC continues to pursue individuals deep into the distribution chain of fraudulent offerings, long after the underlying scheme has been shut down. The allegations reinforce the regulatory risk of participating in unregistered securities sales and operating without broker-dealer registration — foundational compliance requirements that, when ignored, can carry severe consequences years down the line.