Monday, November 28 2022

The owner of a Miami-based payday loan company defrauded hundreds of investors out of millions and paid off others with money he acquired through a Ponzi scheme, according to a newspaper article and federal regulators.

About 500 investors, including many from the Venezuelan American community in South Florida, were won over by Efrain Betancourt Jr.’s sell-thru talk about high returns on their investments in his Sky Group USA short-term lending operation, reported the Miami Herald.

The Miami Securities and Exchange Commission filed a lawsuit against Mr. Betancourt, 33, and his company in September, the report said. The agency accuses Mr. Betancourt of committing securities violations in a scheme that authorities call “affinity fraud”.

In addition to the SEC complaint, half a dozen other lawsuits and arbitration cases have been filed against Mr. Betancourt, according to the newspaper. He has not been criminally charged.

Mr. Betancourt spent some of the US$66 million from the promissory notes on a lavish lifestyle that included a waterfront condo in Miami and a wedding to his fourth wife in Monaco, according to the lawsuit. the SEC. He also accuses him of transferring money to his ex-wife and friends and of using at least $19 million from a Ponzi-like scheme to pay interest to certain investors in order to hold off.

The SEC complaint says Sky Group and Mr. Betancourt falsely told investors that the company would use investors’ money only to make payday loans and cover the costs of those loans. They were promised annual rates of return as high as 120% on the notes.

“We continue to warn 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 seeking permanent injunctions and financial penalties.

The program lasted from January 2016 to March 2020, just before the start 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 of cash and was unable to make interest payments on the investors’ promissory notes.

Court records and legal documents indicate that Mr. Betancourt also falsely claimed to have law and computer engineering degrees in the United States.

Mr Betancourt repeatedly invoked his Fifth Amendment right against self-incrimination during a deposition earlier this month with an attorney representing former clients, the Herald reported. In a deposition with the same lawyer in May, he admitted that he did not have law and computer engineering degrees in the United States. But he insisted his payday loan business was legitimate and called the investors ‘lenders’ involved in funding high-interest short-term loans, which he called ‘business transactions’ .

“I made it very clear that they were investing in a payday portfolio,” Betancourt told attorney Rick Diaz.

In a motion to dismiss the suit, Mr Betancourt’s defense attorney, Mark David Hunter, argued that the promissory notes are loans and not securities, such as stocks and bonds. Therefore, Mr Hunter said, Mr Betancourt and Sky Group did not break the law by failing to repay the lenders.

Mr Diaz described Mr Betancourt as a “mini-Madoff”, a reference to the late New York financial adviser Bernard Madoff, who ran the largest Ponzi scheme in US history.

“I have handled, filed and defended Ponzi schemers over the years,” he told the Herald. “Efrain Betancourt is the sweetest, cruelest and most arrogant, selfish and narcissistic of them all.”

Mr Diaz’s client, Andres Zorrilla, told the newspaper he became suspicious when Mr Betancourt refused to answer his calls and ignored his emails when he tried to withdraw $30,000 of his investments in the company to help cover the costs of his mother’s medical bills. One of his emails included a photo of his mother showing surgical stitches from brain surgery.

“The guy was just stealing money,” said Mr. Zorilla, 38, who added that he also referred his wife, brother and several other business associates to Mr. Betancourt’s company. In total, Mr. Zorrilla and his immediate family invested US$150,000 in the business, they received interest payments but lost all their capital.

“He made a lot of money and got a little crazy with the money,” Mr Zorrilla said.

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