MIAMI — The owner of a Miami-based payday loan company defrauded hundreds of investors out of millions of dollars and paid off others with money he acquired through a Ponzi scheme , according to 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 Betancourt, 33, and his company in September, the report noted. The agency accuses 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 Betancourt, according to the newspaper. He has not been criminally charged.
Betancourt spent part of the $66 million raised from the promissory notes on a lavish lifestyle that included a waterfront condo in Miami and a wedding to his fourth wife in Monaco, the SEC complaint alleges. .
The SEC complaint says Sky Group and 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 of up to 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 pay the interest. on the promissory notes of investors.
In a motion to dismiss the suit, Betancourt defense attorney Mark David Hunter argued that the 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.
Lawyer Rick Diaz described 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.”