NBC 6 Responds

How to Spot a Ponzi Scheme and Other Investment Fraud

Typically, a Ponzi scheme starts when a person promises to invest your money.

Peter Dazeley

Getting rich quick is a promise you may have heard from someone trying to recruit you into a new business or investment opportunity.

But, a lot of these promises can be too good to be true, and could cost you thousands of dollars.

It’s a lesson Gilmer Bautista said he recently learned. Bautista says earlier this year he was looking for a way to make extra money.

“Initially, I invested $1,000,” Bautista said.

He leaped at a new investment opportunity.

“I got excited and decided to put in more money,” Bautista said.

But it didn’t take long for him to realize this roll of the dice wouldn’t pay off.

“At first I was devastated. I basically pulled my savings,” Bautista said.

According to the U.S. Securities and Exchange Commission, Gilmer had invested his money in an alleged Ponzi scheme. Ponzi schemes and other investment fraud has been on the rise since the start of the pandemic.

Typically, a Ponzi scheme starts when a person promises to invest your money. The investor is often promised a consistent high return. Instead, the money from new investors goes to previous investors.

“What the scammer is telling the new investor is that the money is going into an investment, not that it is going to a previous investor who invested in the same thing,” attorney Jason Kellogg said.

Kellogg specializes in Commercial Class Action litigation. He is representing Gilmer and other people in a class action lawsuit related to the alleged Ponzi scheme.

“Consistently it’s people losing everything, you hear a lot of that,” Kellogg said.  

According to a Federal Trade Commission analysis of consumer complaint data, investment scams promising high returns jumped 70 percent in the second quarter of 2020 compared with the same period in 2019.

Bautista says he thought his money was going to help fund small businesses. He signed a contract with a company named MJ Capital Funding. The business was operating out of a tax office in Pompano Beach.

A civil complaint from the U.S. Securities and Exchange Commission alleges MJ Capital raised at least $70 million in fraudulent security offerings and used at least $20 million of new investor money to pay old investors. The complaint also alleges a portion of $27.4 million went to people responsible for recruiting new investors.

Gilmer said a salesperson lured him in on social media.

“She said don’t worry Gilmer, it’s 100 percent real,” Bautista described.

 Once he was on the hook, he says he invested $45,000.

“Anyone can post whatever they want, anyone can fabricate a complete life on social media, they can show you what they want you to see,” Cinthya Lavin with Better Business Bureau said.

Lavin says social media is one way scammers lure victims into investment schemes.

“What these so-called investors use is the promise of a big change in your life, going from working a regular job or a 9 to 5, even being unemployed to extreme riches,” Lavin says.

Lavin said promises like a consistent, high rate of return and luxury lifestyle should be red flags that an investment may not be legitimate.

She also suggests researching if the person you are giving your money to is registered or licensed to sell the investments they are offering.

“If they are fortunate to find out early, they may be fortunate to enough to get their money back,” Kellogg said.

Bautista is yet to get his money back.  

“With that money I could have done anything else, put a down payment on a car, or for a house, buy an apartment,” Bautista said.

He hopes his story will serve as a warning to others.

“It can happen to anyone,” Bautista said.

NBC 6 Responds reached out to an attorney representing Johanna Garcia the owner of MJ Capital Funding. No comment has been received, but her attorney has told other media outlets Garcia denies the claims and that she did not do anything knowingly incorrect or improper.

There is also an online petition with over 3200 signatures supporting Garcia. Some signatures are from investors who say they received the money they were promised from MJ Capital Funding.

The case is scheduled to go to trial in May 2023.

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