Miami payday loan operator ordered to pay $39 million to Venezuelan investors in SEC case

A Miami payday loan business must pay more than $39 million to hundreds of Venezuelan Americans in South Florida who lost a chunk of their money after investing in the company, according to a federal judge’s order.

Sky Group USA, LLC, agreed to the final judgment with the Securities and Exchange Commission without admitting or denying violations of federal laws.

Sky Group has until the end of July to pay that amount to resolve the SEC’s civil case, according to court records. Under similar settlement terms, Efrain Betancourt Jr., the CEO of Sky Group, has agreed to pay more than $6 million towards the total penalty.

The Securities and Exchange Commission, whose regional offices are in downtown Miami, plans to reimburse more than 500 Sky Group investors from whatever the company and Betancourt eventually pay towards their losses. It is not expected that Sky Group and Betancourt will repay the full amount owed to the SEC under the judgment issued by U.S. District Judge Beth Bloom.

Under the agreements with the SEC, Sky Group and Betancourt, 34, are banned from trading securities in the United States. Their lawyer, Mark Hunter, declined to comment on Monday.

In September of last year, the SEC in Miami filed a civil lawsuit against Betancourt and his company, accusing them of committing securities violations in a scheme that authorities described as “affinity fraud.” In a civil enforcement action, the SEC said Betancourt and Sky Group sold investors fraudulent promissory notes totaling $66 million. In effect, Betancourt raised millions from them to finance high-interest loans made to borrowers across the country.

According to the SEC complaint, Betancourt spent most of the money on a luxurious lifestyle — including a new Miami waterfront condo and a wedding to his fourth wife in Monaco — while using at least $19 million to make interest payments to some investors to keep them at bay.

In an effort to dismiss the SEC’s complaint, Betancourt’s lawyer, Hunter, argued that promissory notes were not securities like stocks and bonds but rather were loans; therefore, his client and Sky Group did not break the law when they failed to pay back the lenders.

Betancourt’s alleged scheme, outlined in the SEC complaint, lasted from January 2016 to just before the coronavirus pandemic struck the country in March 2020. As countless borrowers defaulted on their payday loans, his company, Sky Group, incurred a severe cash-flow problem and was unable to make interest payments on investors’ promissory notes.

In December, Betancourt gave a deposition in one of several related arbitration cases in which he repeatedly invoked his Fifth Amendment right against self-incrimination while under questioning.

In a previous deposition, Betancourt, who was born in Venezuela and raised in the Miami area, admitted that he did not have law and computer engineering degrees in the United States. But he insisted that his payday loan business was legitimate, despite charging interest rates much higher than Florida’s annual cap of 18 percent. He also said that the people who invested in his company were “lenders” involved in financing short-term, high-interest loans. He called them “business transactions.”

“I made it very clear that they were investing into a payday portfolio,” Betancourt said in a May 2021 deposition. “Now the payday portfolio has risks.”

Despite his defense, Betancourt and Sky Group lost one arbitration case earlier this year to a Venezuelan family represented by Miami attorney Rick Diaz. The judgment was for $15,000 — though the family claimed losing $150,000 in their investment with Betancourt’s Sky Group.

“We were among the first ones to pursue this guy and refer him to the SEC,” Diaz told the Miami Herald on Monday. “We expect to collect our judgment [against Betancourt and Sky Group] in state court, but if that doesn’t work out we will make a claim with the SEC.”

Promise of high returns

According to the SEC’s complaint, 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, promising them annual rates of return as high as 120 percent on the notes.

“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, in a prior statement. The SEC said Sky Group’s operation was akin to a “Ponzi” scheme.

In reality, the complaint said, Betancourt misappropriated at least $2.9 million for personal use. Among his expenses: an extravagant wedding at a chateau on the French Riviera, vacations to Disney resorts and the Caribbean, and costs associated with the purchase of a luxury Miami condominium at Epic Residences on Biscayne Boulevard. He also used some of the money for service on his personal Piper airplane, SEC officials said.

Epic Residences has also sued Betancourt, claiming he owes more than $65,000 in condo and hotel assessments, according to court records.

Betancourt was also accused of transferring at least another $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. That company’s bank accounts were controlled by Efrain Betancourt and his current wife, Leidy Badillo, the complaint said.

In a final judgment filed in late June, EEB Capital agreed to pay $2.2 million towards the judgment against Sky Group and Efrain Betancourt.

For her part, Angelica Betancourt denied that she received $1.2 million from Sky Group, as alleged in the SEC complaint. She said she only earned an annual salary of $60,000 from the payday loan company, but she has yet to resolve her dispute with the securities agency.