MIAMI (AP) – The owner of a Miami-based payday loan company defrauded hundreds of investors out of millions of dollars and paid others back with money he acquired through a Ponzi, according to a newspaper article and federal regulators.
Around 500 investors, including many from the Venezuelan community of South Florida, were won over by Efrain Betancourt Jr.’s sales pitch on the high returns on their investments in his short-term loan operation Sky Group USA, the Miami Herald reported.
the Miami Securities and Exchange Commission filed a complaint against Betancourt, 33, and his company in September, the report notes. The agency accuses Betancourt of having committed securities violations as part of a scheme that authorities qualify as “affinity fraud”.
In addition to the SEC complaint, a half-dozen other lawsuits and arbitration cases have been filed against Betancourt, according to the newspaper. He has not been criminally charged.
Betancourt spent part of the $ 66 million raised from promissory notes for a lavish lifestyle that included a waterside condo in Miami and a wedding with his fourth wife in Monaco, according to the SEC complaint . He also accuses him of transferring money to his ex-wife and friends and of using at least $ 19 million from a Ponzi scheme to pay interest to certain investors in order to keep at bay.
The SEC complaint says Sky Group and Betancourt falsely told investors the company would use investor money only to make payday loans and cover the costs of those loans. They have been promised annual rates of return as high as 120% on the Notes.
“We continue to caution investors to be wary of any investment that promises returns that are too good to be true,” Eric I. Bustillo, director of the SEC’s Miami regional office, told the Herald.
The SEC is asking for permanent injunctions and financial penalties.
The program lasted from January 2016 to March 2020, just before the onset of the coronavirus pandemic, according to the complaint, which indicates that when countless borrowers defaulted on their payday loans, Sky Group encountered a serious problem with cash flow and was unable to pay the interest. on investor promissory notes.
Court records and legal documents indicate that Betancourt also falsely claimed to have degrees in law and computer engineering in the United States.
Betancourt has repeatedly invoked his Fifth Amendment right against self-incrimination in a deposition earlier this month with a lawyer representing former clients, the Herald reported. In a deposition with the same lawyer in May, he admitted that he did not have degrees in law and computer engineering in the United States. But he insisted his payday lending business was legitimate and called investors “lenders” involved in funding short-term, high-interest loans, which he called “business transactions.”
“I made it clear that they were investing in a payday portfolio,” Betancourt told lawyer Rick Diaz.
In a motion to dismiss the complaint, Betancourt defense attorney Mark David Hunter argued that promissory notes are loans and not securities, such as stocks and bonds. Therefore, Hunter said, Betancourt and Sky Group did not break the law when they failed to repay the lenders.
Diaz described Betancourt as a “mini-Madoff,” a reference to the late New York financial adviser Bernard Madoff, who led the biggest Ponzi scheme in US history.
âI have dealt with, filed for and defended Ponzi schemes over the years,â he told the Herald. “
Diaz’s client Andres Zorrilla told the newspaper he grew suspicious when Betancourt didn’t take his calls and ignored his emails when he tried to withdraw $ 30,000 from his investments in the business to help cover her mother’s medical expenses. One of her emails included a photo of her mother showing the surgical stitches from brain surgery.
“The guy was just stealing money,” said Zorilla, 38, who added that he also referred his wife, brother and several other business associates to the Betancourt company. Together, Zorrilla and her immediate family invested $ 150,000 in the business. They received a few interest payments, but lost all of their principal.
âHe made a lot of money and went a little crazy with the money,â Zorrilla said.