SEC v. JMJ Capital Group and Richard Lee Ramirez is a Securities Exchange Commission (“SEC”) enforcement action filed in the United States District Court for the Southern District of California on September 30, 2022.  JMJ Capital Group (“JMJ”) is a California corporation and Richard Lee Ramirez (“Ramirez”) is the owner and sole operator of JMJ residing in southern California. 

The SEC brings claims against JMJ and Ramirez for violations of the Securities Act and the Securities Exchange Act.  The complaint seeks: (i) permanent injunctive relief to prevent JMJ and Ramirez from future violations of securities law; (ii) permanent injunctive relief barring JMJ and Ramirez from issuing securities; (iii) disgorgement with pre-judgment interest; and (iv) damages under the civil remedies’ provisions of the above statutes.  Neither JMJ nor Ramirez are registered with the SEC in any capacity.   

The complaint alleges that JMJ and Ramirez defrauded up to 47 investors of at least $5.8 million in capital from a period spanning March 2019 through August 2021.  JMJ solicited investors through direct e-mail pitches, attaching “Funding Partner Agreements” that provided the imprimatur of lucrative investment options with demonstrated return outcomes.  The primary investment option JMJ offered investors was financing “invoice factoring.” 

JMJ defined “invoice factoring” as a “form of financing that isn’t dependent on banks or lengthy loan applications.  It isn’t really a loan at all.  Instead a business (that’s you) sells its outstanding invoices to a factoring company (that’s us) in exchange for upfront cash.”  JMJ’s online website promoted itself as a long-standing “invoice factoring” business.  JMJ claimed in its Partner Agreements to have made millions in the accounts receivable industry, promising returns from 12% to 22%.

While “invoice factoring” was JMJ’s prime investment vehicle, the company began promoting other investment options that, by design, sought to capitalize on pandemic-impacted industries.  JMJ styled one investment option as financing contracts to rebuild air conditioning systems for Disney Cruise ships, as spending on ship repairs sharply increased during the Covid-19 travel downturn.  Yet another investment option was pitched as financing large purchases of personal protective equipment, then in short supply, for possible returns of up to 30% in less than 90 days.  JMJ guaranteed investors that losses would only be possible in the event that goods associated with the investments were lost or destroyed in transit. 

According to the complaint, JMJ engaged in almost no legitimate business practices related to investing in any of these business lines.  The SEC found less than $100,000 in revenue generated from the “invoice factoring” line, found one purchase of latex gloves for $2,100, and found zero income from the other purported investments.  In September 2019, Ramirez allegedly began using the millions acquired from late-joining investors to satisfy partial redemptions to some 33 earlier investors.  Many investors who sought withdrawal often experienced delay tactics, or due to Ramirez’s misrepresentations, were redirected to invest in the pandemic-related investment options. 

The same day the SEC Complaint was filed, a federal grand jury indicted Ramirez in the Southern District of California.  The unsealed indictment in United States v. Ramirez, Case No. 22 CR2264BAS, alleges that Ramirez defrauded the JMJ investors while using the funds to support a posh lifestyle, including luxury vehicles, travel, real estate transactions, and entertainment.  The indictment includes one count of willful securities fraud and two counts of money laundering of criminally derived property.  The indictment requires an immediate asset freeze and, if convicted, Ramirez will forfeit all assets derived from the JMJ fraud scheme.  The criminal proceeding against Ramirez is yet another example of the Department of Justice increasing its focus on prosecutions out of its Civil Fraud Division and working in tandem with the SEC in the aftermath of rampant pandemic era fraud.