Miami Investors Lost Millions in Payday Loan Scheme, SEC Says
After his mother had brain surgery for cancer last year, Andres Zorrilla was in desperate need of fundraising for his post-operative treatment, so he tried to withdraw the $ 30,000 he had invested in a corporation. payday loan in Miami.
But Zorrilla says Efrain Betancourt Jr., the CEO of Sky Group USA, LLC, blew him away, ignoring his flood of calls and an email about the “family crisis” with an attached photo of his mother showing them. surgical stitches on his head.
“That’s when I started to be suspicious and worried,” said Zorrilla, 38, who also referred his wife, brother and several other associates to Betancourt as investors in his Miami-based payday loan business.
“I found out they were all bulls —. … The guy was just stealing money.
In total, hundreds of investors – most of them from the Venezuelan-American community in South Florida – were dazzled by Betancourt’s polite sales pitch about the high interest returns on their investments in its operation. short term loan. Their faith in Betancourt, who falsely claimed to have law and computer engineering degrees in the United States, has come at a cost, according to the courts and other legal records.
In September, Miami Securities and Exchange Commission filed a civil complaint against Betancourt and his company, accusing them of having committed securities violations as part of a scheme that authorities have called “affinity fraud”. In the civil action, the SEC said Betancourt and Sky Group sold fraudulent promissory notes totaling $ 66 million to more than 500 investors. Indeed, Betancourt raised millions from them to finance high interest loans to borrowers across the country.
According to the SEC complaint, Betancourt spent most of the money on a luxurious lifestyle – including a new waterfront condo in Miami and a wedding with his fourth wife in Monaco – while using at least $ 19 million Ponzi scheme to pay interest to some investors to keep them at bay.
Betancourt, 33, and his company, Sky Group, are named as defendants in SEC civil caser; they have not been criminally charged.
Betancourt’s defense attorney in the SEC case, Mark David Hunter, did not return multiple emails and phone messages seeking comment. In a motion to dismiss the SEC complaint, Hunter argued that promissory notes are not securities like stocks and bonds, but rather loans; therefore, his client and Sky Group did not break the law when they failed to repay the lenders.
Zorrilla, who works in real estate finance in Miami, said he felt bad not only for himself but for his wife, brother and several others he had introduced to Betancourt.
“He made a lot of money and went a little crazy with the money,” said Zorrilla, whose immediate family invested a total of $ 150,000 and received interest payments but lost all of their principal. . “That’s how he got away with this Ponzi scheme for so long.”
Betancourt’s alleged plan, described in the SEC complaint, lasted from January 2016 until just before the coronavirus pandemic hit the country in March 2020. While countless borrowers defaulted on their payday loans, his company, Sky Group, encountered a serious cash flow problem and was unable to pay the interest on the promissory notes to investors.
Miami attorney Rick Diaz, who represents Zorrilla, his wife Melissa Montoya and brother Juan Pablo Montoya in their efforts to recoup their investment losses, described Betancourt as a “mini-Madoff”. It refers to the late New York financial adviser Bernard Madoff, who led the biggest Ponzi scheme in the country’s history.
“I have dealt with, filed for and defended Ponzi schemes over the years,” Diaz told the Miami Herald. “Efrain Betancourt is the sweetest, most cruel and arrogant, selfish and narcissistic of all.”
Earlier this month, Betancourt gave a deposition in which he repeatedly invoked his Fifth Amendment right against self-incrimination while being questioned by Diaz. In a prior statement, Betancourt, who was born in Venezuela and raised in the Miami area, admitted that he did not have a law and computer engineering degree in the United States. But he insisted his payday lending business was legitimate, despite interest rates much higher than Florida’s 18 percent annual cap. He also said that the people who invested in his business were “lenders” involved in funding short-term, high-interest loans. He called them “commercial transactions”.
“I made it very clear that they were investing in a payday portfolio,” Betancourt told Diaz in a May 2021 deposition. “Now the payday portfolio has risk. “
Promise of high returns
According to the SEC complaint, Sky Group and Betancourt falsely told investors that the company would use investor money only to make payday loans and cover the costs of those loans, promising them annual rates of return of up to 120. % on tickets.
In fact, according to the complaint, Betancourt embezzled at least $ 2.9 million for personal use. Among his expenses: an extravagant wedding in a castle on the French Riviera, vacations to Disney resorts and the Caribbean, and the costs associated with purchasing a luxury Miami condominium at Epic Residences on Biscayne Boulevard. . He also used some of the money for the service on his personal Piper plane, SEC officials said.
Epic Residences also sued Betancourt, claiming he owed more than $ 65,000 in condo and hotel reviews, court records show.
Betancourt is also accused of transferring at least an additional $ 3.6 million to friends and family, including his ex-wife, Angelica Betancourt, and to EEB Capital Group LLC for “no apparent legitimate business purpose”, according to the SEC complaint. The company’s bank accounts were controlled by Betancourt and his current wife, Leidy Badillo, according to the complaint.
In court documents, EEB Capital’s attorney, James Sallah, admitted that Betancourt and his current wife, Badillo, were signatories to the firm’s bank accounts, but denied the SEC’s claim that EEB reportedly received $ 1.5 million in funds from Sky Group investors for “no apparent legitimate purpose.” . “
For her part, Angelica Betancourt has denied receiving $ 1.2 million from Sky Group, as the SEC complaint claims. She said she only earned a $ 60,000 annual salary from the payday loan company, according to her lawyer, Diaz, who also represents Zorrilla and others who have sued her ex-husband.
In addition to the SEC complaint, there are at least a half-dozen lawsuits and arbitration cases filed against Betancourt and Sky Group.
Among the plaintiffs: Victor Segura and his daughter, Johanna Segura, who lost $ 200,000 after investing in his alleged loan program. They saw themselves as “investors” and not “lenders” as Betancourt has tried to describe them and others in his defense. But Segura lawyers Gerardo Vazquez and Steven Herzberg counter that Betancourt simply interpreted their investments as promissory notes to make them look like loans and not securities.
According to Seguras’ federal lawsuit, “Sky Group and Betancourt used substantial investor funds for purposes other than cash advances. [to Payday loan borrowers], including the payment of operating expenses and executive compensation of Sky Group … as well as the payment of commissions to its unregistered advisers, brokers and sales agents. “
SEC accuses fraud
SEC officials accused Betancourt of lying to his payday loan investors.
Their complaint alleges that Betancourt and Sky Group misled investors by promising them extraordinary returns on their promissory notes and stating that the payday lending business was profitable, even though Sky Group did not generate enough cash. income to cover principal and interest payments owed to investors. Betancourt was able to get around Florida’s caps on usury rates by providing payday loans through Utah, which allowed for much higher lending terms, until its business model collapsed.
“The scheme collapsed in July 2019, when Betancourt told investors that Sky Group was suspending investor repayments on the notes,” according to the SEC complaint filed in Miami federal court. Even then, Betancourt and Sky Group continued to lie, falsely accusing the suspension of refunds from a supplier responsible for processing refunds from the company’s investors.
“We continue to caution investors to be wary of any investment that promises returns that are too good to be true,” said Eric I. Bustillo, director of the SEC’s Miami regional office.
The SEC is seeking permanent injunctions and financial penalties against the defendants.