The Securities and Exchange Commission has filed suit against a payday loan company and its owner alleging that millions of dollars was stolen from its investors.
Miami-based Sky Group USA, which is run by Efrain Betancourt Jr., allegedly gained around 500 investors based on the promise of high-interest returns on their investments.
However, the SEC claimed that Betancourt spent some of the $66 million he raised to fund a lavish lifestyle and not towards the business. Furthermore, the SEC accused Betancourt of allegedly paying out at least $19 million he acquired from a Ponzi scheme to keep some investors inside the company. The SEC alleged that this scheme lasted from January 2016 to March 2020.
According to the SEC, when the COVID pandemic took hold, Sky Group USA reportedly saw many borrowers default on their payday loans, which caused a major cash flow issue for the company and it was not able to make payments to its investors.
"We continue to caution investors to be wary of any investment that promises returns that are too good to be true," said the SEC's Miami office director Eric I. Bustillo.
However, Betancourt claims that he was always upfront with investors about the project, telling attorney Rick Diaz that he "made it very clear" that the company was a payday portfolio. However, Diaz was not impressed.
"I've handled and deposed and defended Ponzi schemers over the years," he told the Miami Herald. "Efrain Betancourt is the smoothest, cruelest and most arrogant, selfish and narcissistic of them all."
The SEC lawsuit seeks permanent injunctions and financial penalties against Betancourt and Sky Group.
The SEC complaint says Sky Group and Betancourt falsely told investors that the company would use investors' money solely to make payday loans and cover the costs of such loans. They were promised annual rates of return as high as 120 percent on the notes.
Court records and legal documents state that Betancourt also falsely claimed to have law and computer engineering degrees in the United States.
Betancourt repeatedly invoked his Fifth Amendment right against self-incrimination during a deposition earlier this month with a lawyer representing former clients, the Herald reported. In a deposition with the same lawyer in May, he did admit that he didn't have law and computer engineering degrees in the United States. But he insisted his payday loan business was legitimate, and called the investors "lenders" who were involved in financing short-term, high-interest loans, which he called "business transactions."
Diaz described Betancourt as a "mini-Madoff," a reference to the late New York financial adviser, Bernard Madoff, who ran the biggest Ponzi scheme in U.S. history.
Diaz's client Andres Zorrilla told the newspaper he became suspicious when Betancourt wouldn't take his calls and ignored his emails when he tried to withdraw $30,000 from his investments in the company to help cover the costs of his mother's medical expenses. One of his emails included a photo of his mother showing the surgical stitches from brain surgery.
"The guy was just stealing money,″ said Zorilla, 38, who added that he also referred his wife, her brother and several other business associates to Betancourt's company. All together, Zorrilla and his immediate family invested $150,000 in the company. They received some interest payments, but lost all of their principal.
"He made a lot of money and went a little crazy with the money," Zorrilla said.
The Associated Press contributed to this report.
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