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Miami investors lost millions in payday loan scheme, SEC says

After his mom underwent mind surgical procedure for most cancers final 12 months, Andres Zorrilla desperately wanted to lift cash for her post-op therapy and so he tried to withdraw $30,000 that he had invested in a Miami payday mortgage firm.

However Zorrilla says Efrain Betancourt Jr., the CEO of Sky Group USA, LLC, blew him off, ignoring his stream of calls and an e-mail in regards to the “household disaster” together with an connected photograph of his mom displaying the surgical stitches on her head.

“That’s once I began to get suspicious and apprehensive,” mentioned Zorrilla, 38, who additionally referred his spouse, her brother, and a number of other different enterprise associates to Betancourt as traders in his Miami-based payday mortgage enterprise.

“I came upon it was all bulls—. … The man was simply stealing cash.”

All advised, lots of traders — most from South Florida’s Venezuelan-American group — had been dazzled by Betancourt’s polished gross sales pitch of high-interest returns on their investments in his short-term mortgage operation. Their religion in Betancourt, who falsely claimed to have legislation and laptop engineering levels in America, price them dearly, in accordance with the court docket and different authorized data.

In September, the Securities and Exchange Commission in Miami filed a civil lawsuit against Betancourt and his firm, accusing them of committing securities violations in a scheme that authorities described as “affinity fraud.” Within the civil enforcement motion, the SEC says Betancourt and Sky Group bought greater than 500 traders’ fraudulent promissory notes totaling $66 million. In impact, Betancourt raised thousands and thousands from them to finance high-interest loans made to debtors throughout the nation.

Based on the SEC grievance, Betancourt spent a lot of the cash on an opulent way of life — together with a brand new Miami waterfront apartment and a marriage to his fourth spouse in Monaco — whereas utilizing at the least $19 million Ponzi-style to make curiosity funds to some traders to maintain them at bay.

Betancourt, 33, and his firm, Sky Group, are named as defendants in the SEC civil matter; they haven’t been charged criminally.

Mortgage protection
Betancourt’s protection lawyer within the SEC case, Mark David Hunter, didn’t return a number of e-mails and cellphone messages looking for remarks. In a movement to dismiss the SEC’s grievance, Hunter argued that promissory notes are usually not securities like shares and bonds however quite are loans; due to this fact, his shopper and Sky Group didn’t break the legislation once they did not pay again the lenders.

Zorrilla, who works in actual property financing in Miami, mentioned he felt bad not just for himself but for his spouse, her brother, and a number of other others whom he had launched to Betancourt.

“He made some huge cash and went a bit loopy with the cash,” mentioned Zorrilla, whose quick household invested a complete of $150,000 and obtained some curiosity funds but misplaced all of their principal. “That’s how he was in a position to get away with this Ponzi scheme for therefore lengthy.”

Betancourt’s alleged scheme, outlined within the SEC grievance, lasted from January 2016 to only earlier than the coronavirus pandemic struck the nation in March 2020. As numerous debtors defaulted on their payday loans, his firm, Sky Group, incurred an extreme cash-flow drawback and was unable to make curiosity funds on traders’ promissory notes.

Miami lawyer Rick Diaz, who’s representing Zorrilla, his spouse, Melissa Montoya, and her brother, Juan Pablo Montoya, in efforts to get better their funding losses, described Betancourt as a “mini-Madoff.” His reference is to the late New York monetary adviser, Bernard Madoff, who ran the largest Ponzi scheme within the nation’s historical past.

“I’ve dealt with and deposed and defended Ponzi schemers through the years,” Diaz advised the Miami Herald. “Efrain Betancourt is the smoothest, cruelest and most boastful, egocentric and narcissistic of all of them.”

Earlier this month, Betancourt gave a deposition during which he repeatedly invoked his Fifth Modification proper towards self-incrimination while being questioned by Diaz. In a previous deposition, Betancourt, who was born in Venezuela and raised within the Miami space, admitted that he didn’t have legislation and laptop engineering levels in America. However, he insisted that his payday mortgage enterprise was reliable, regardless of charging rates of interest a lot greater than Florida’s annual cap of 18 p.c. He additionally mentioned that the individuals who invested in his firm had been “lenders” concerned with financing short-term, high-interest loans. He referred to as the “enterprise transactions.”

“I made it very clear that they had been investing right into a payday portfolio,” Betancourt advised Diaz in a Could 2021 deposition. “Now the payday portfolio has dangers.”

The promise of excessive returns
Based on the SEC’s grievance, Sky Group and Betancourt falsely advised traders that the corporate would use traders’ cash solely to make payday loans and canopy the prices of such loans, promising them annual charges of return as excessive as 120 p.c on the notes.

In actuality, the grievance says, Betancourt misappropriated at the least $2.9 million for private use. Amongst his bills: an extravagant wedding ceremony at a chateau on the French Riviera, holidays to Disney resorts and the Caribbean, and prices related to the acquisition of a luxurious Miami condominium at Epic Residences on Biscayne Boulevard. He additionally used a number of the cash for service on his private Piper airplane, SEC officers mentioned.

Epic Residences has additionally sued Betancourt, claiming he owes greater than $65,000 in apartment and resort assessments, in accordance with court docket data.

Betancourt can also be accused of transferring at least one other $3.6 million to family and friends, together with his ex-wife, Angelica Betancourt, and to EEB Capital Group LLC for “no obvious reliable enterprise function,” in accordance with the SEC grievance. That firm’s financial institution accounts had been managed by Betancourt and his present spouse, Leidy Badillo, the grievance says.

In court docket papers, EEB Capital’s lawyer, James Sallah, acknowledged that Betancourt and his present spouse, Badillo, had been signatories on the corporate’s financial institution accounts however denied the SEC’s allegation that EEB obtained $1.5 million of Sky Group traders’ funds for “no obvious reliable function.”

For her half, Angelica Betancourt denied that she obtained $1.2 million from Sky Group, as alleged within the SEC grievance. She mentioned she solely earned an annual wage of $60,000 from the payday mortgage firm, in accordance with her lawyer, Diaz, who additionally represents Zorrilla and others who sued her ex-husband.

Along with the SEC grievance, there are at the least a half-dozen lawsuits and arbitration instances filed towards Betancourt and Sky Group.

Among the many plaintiffs: Victor Segura and his daughter, Johanna Segura, who misplaced $200,000 after investing in his alleged mortgage scheme. They noticed themselves as “traders,” not “lenders,” as Betancourt has tried to paint them and others in his protection. However, the Seguras’ attorneys, Gerardo Vazquez and Steven Herzberg counter that Betancourt has merely construed their investments as promissory notes to make them appear to be loans, not securities.

Based on the Seguras’ federal lawsuit, “Sky Group and Betancourt used substantial investor funds for functions aside from the money advances [to Payday loan borrowers], together with paying for working bills and compensation to Sky Group’s executives … together with the cost of commissions to its unregistered advisors, brokers, and gross sales brokers.”

SEC alleges fraud
SEC officers accused Betancourt of mendacity to his payday mortgage traders.

Their grievance alleges that Betancourt and Sky Group misled traders by promising extraordinary returns on their promissory notes and representing that the payday mortgage enterprise was worthwhile, despite the fact that Sky Group didn’t generate sufficient revenues to cowl principal and curiosity funds attributable to traders. Betancourt was in a position to circumvent Florida’s caps on usury charges by making the payday loans via Utah, which permits far greater mortgage phrases, till his enterprise mannequin collapsed.

“The scheme unraveled in July 2019, when Betancourt advised traders that Sky Group was suspending investor repayments on the notes,” in accordance with the SEC grievance filed in Miami federal court docket. “Even then, Betancourt and Sky Group continued to lie, falsely blaming the suspension of repayments on a vendor chargeable for processing the corporate’s investor repayments.”

“We proceed to warn traders to be cautious of any funding that guarantees returns which are too good to be true,” mentioned Eric I. Bustillo, director of the SEC’s Miami Regional Workplace.

The SEC is looking for everlasting injunctions and monetary penalties from the defendants.

Profile Image of Jay Weaver
Jay Weaver writes about dangerous guys who specialize in con jobs, rip-offs, and squirreling away thousands and thousands. Since becoming a member of the Miami Herald in 1999, he’s coated the federal courts nonstop, from Elian’s custody battle to A-Rod’s steroid abuse. He was on the Herald staff that received the Pulitzer Prize for breaking information in 2001. He and three Herald colleagues had been Pulitzer Prize finalists for explanatory reporting in 2019 for a collection of gold smuggled from South America to Miami.