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Florida Payday loan scheme bilks investors out of millions, SEC says

MIAMI — The proprietor of a Miami-based payday mortgage firm bilked lots of of traders out of tens of millions of {dollars} and repaid others with cash he acquired from a Ponzi scheme, in accordance with a newspaper report and federal regulators.

About 500 traders, many from South Florida’s Venezuelan American neighborhood, had been taken in by Efrain Betancourt Jr.’s gross sales pitch of high-interest returns on their investments in his short-term mortgage operation Sky Group USA, the Miami Herald reported.

The Securities and Change Fee in Miami filed a lawsuit towards Betancourt, 33, and his firm in September, the report famous. The company accuses Betancourt of committing securities violations in a scheme that authorities describe as “affinity fraud.”

Along with the SEC grievance, a half-dozen different lawsuits and arbitration circumstances have been filed towards Betancourt, in accordance with the newspaper. He has not been criminally charged.

Betancourt spent a portion of the $66 million raised from promissory notes on a lavish way of life that included a Miami waterfront rental and a marriage to his fourth spouse in Monaco, the SEC grievance fees. It additionally accuses him of transferring cash to his ex-wife and associates and of utilizing at the least $19 million from a Ponzi-style scheme to make curiosity funds to some traders to maintain them at bay.

The SEC grievance says Sky Group and Betancourt falsely informed traders that the corporate would use traders’ cash solely to make payday loans and canopy the prices of such loans. They had been promised annual charges of return as excessive as 120% on the notes.

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

The SEC is in search of permanant injunctions and monetary penalties.

The scheme lasted from January 2016 to March 2020, simply earlier than the coronavirus pandemic started, in accordance with the grievance, which says that when numerous debtors defaulted on their payday loans, Sky Group incurred a extreme cash-flow drawback and was unable to make curiosity funds on traders’ promissory notes.

Court docket information and authorized paperwork state that Betancourt additionally falsely claimed to have regulation and laptop engineering levels in the US.

Betancourt repeatedly invoked his Fifth Modification proper towards self-incrimination throughout a deposition earlier this month with a lawyer representing former shoppers, the Herald reported. In a deposition with the identical lawyer in Might, he did admit that he didn’t have regulation and laptop engineering levels in the US. However he insisted his payday mortgage enterprise was reliable, and referred to as the traders “lenders” who had been concerned in financing short-term, high-interest loans, which he referred to as “enterprise transactions.”

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“I made it very clear that they had been investing right into a payday portfolio,” Betancourt informed lawyer Rick Diaz.

In a movement to dismiss the grievance, Betancourt’s protection lawyer Mark David Hunter argued that promissory notes are loans, not securities, akin to shares and bonds. Due to this fact, Hunter mentioned, Betancourt and Sky Group didn’t break the regulation once they didn’t pay again the lenders.

Diaz described Betancourt as a “mini-Madoff,” a reference to the late New York monetary adviser, Bernard Madoff, who ran the largest Ponzi scheme in U.S. historical past.

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

Diaz’s consumer Andres Zorrilla informed the newspaper he turned suspicious when Betancourt wouldn’t take his calls and ignored his emails when he tried to withdraw $30,000 from his investments within the firm to assist cowl the prices of his mom’s medical bills. One among his emails included a photograph of his mom displaying the surgical stitches from mind surgical procedure.

“The man was simply stealing cash,” mentioned Zorilla, 38, who added that he additionally referred his spouse, her brother and several other different enterprise associates to Betancourt’s firm. All collectively, Zorrilla and his speedy household invested $150,000 within the firm. They obtained some curiosity funds, however misplaced all of their principal.

“He made some huge cash and went a bit of loopy with the cash,” Zorrilla mentioned.

 

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