SEC Charges Payday Lender Sky Group With $66M Fraud

The Securities and Exchange Commission (SEC) has accused a Miami-based payday loan company and its CEO of defrauding its investors.

The SEC announced the charges on Monday (Sept. 27) against Sky Group USA LLC and Efrain Betancourt, Jr., its chief executive officer, of fraudulently raising at least $66 million by selling promissory notes to more than 500 retail investors, many of whom were part of South Florida’s Venezuelan-American community.

In a complaint filed in the United States District Court for the Southern District of Florida, the commission says Sky and Betancourt lied to investors by claiming that the investors’ money would be used only to make payday loans and cover the cost of those loans.

Read more: FTC Tosses Payday Lender From Industry, Frees Debtors

“In reality, Betancourt misappropriated at least $2.9 million for personal use – including for his lavish wedding at a chateau on the French Riviera, vacations to Disney resorts and the Caribbean, costs associated with the purchase of a luxury Miami condominium and service on his personal Piper airplane,” the SEC said in its news release.

The SEC says Betancourt also transferred at least $3.6 million to friends and relatives, including his ex-wife Angela Betancourt, who is named as a relief defendant. Sky Group and Betancourt also allegedly used at least $19.2 million of investor cash to make “Ponzi-like payments” to other investors.

Lastly, the SEC accuses Sky and Betancourt of promising investors annual returns of as much as 120%, when the company did not generate enough money to cover the principal and interest payments owed to investors.

Read more: The CFPB’s Payday Lending Rules Are Officially Out

“As alleged in our complaint, Sky Group and Betancourt lured unsuspecting investors, including many members of the South Florida Venezuelan-American community, with false claims and promises of high-return, low-risk investments,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “We continue to caution investors to be wary of any investment that promises returns that are too good to be true.”