CRIMINAL CAPITALI$M
Miami payday loan operator promised investors huge returns. SEC says they lost millions



Jay Weaver
Tue, December 28, 2021

After his mother underwent brain surgery for cancer last year, Andres Zorrilla desperately needed to raise money for her post-op treatment and so he tried to withdraw $30,000 that he had invested in a Miami payday loan company.

But Zorrilla says Efrain Betancourt Jr., the CEO of Sky Group USA, LLC, blew him off, ignoring his stream of calls and an email about the “family crisis” along with an attached photo of his mother showing the surgical stitches on her head.

“That’s when I started to get suspicious and worried,” said Zorrilla, 38, who also referred his wife, her brother and several other business associates to Betancourt as investors in his Miami-based payday loan business.

“I found out it was all bulls---. ... The guy was just stealing money.”

All told, hundreds of investors — most from South Florida’s Venezuelan-American community — were dazzled by Betancourt’s polished sales pitch of high-interest returns on their investments in his short-term loan operation. Their faith in Betancourt, who falsely claimed to have law and computer engineering degrees in the United States, cost them dearly, according to court and other legal records.

In September, the Securities and Exchange Commission 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 the civil enforcement action, the SEC says Betancourt and Sky Group sold more than 500 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 Ponzi-style to make interest payments to some investors to keep them at bay.

Betancourt, 33, and his company, Sky Group, are named as defendants in the SEC civil matter; they have not been charged criminally.
Loan defense

Betancourt’s defense attorney in the SEC case, Mark David Hunter, did not return several email and phone messages seeking comment. In a motion to dismiss the SEC’s complaint, Hunter argued that promissory notes are not securities like stocks and bonds but rather are loans; therefore, his client and Sky Group did not break the law when they failed to pay back the lenders.

Zorrilla, who works in real estate financing in Miami, said he felt badly not only for himself but for his wife, her brother and several others whom he had introduced to Betancourt.

“He made a lot of money and went a little crazy with the money,” said Zorrilla, whose immediate family invested a total of $150,000 and received some interest payments but lost all of their principal. “That’s how he was able to get away with this Ponzi scheme for so long.”

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.

Miami attorney Rick Diaz, who is representing Zorrilla, his wife, Melissa Montoya, and her brother, Juan Pablo Montoya, in efforts to recover their investment losses, described Betancourt as a “mini-Madoff.” His reference is to the late New York financial adviser, Bernard Madoff, who ran the biggest Ponzi scheme in the nation’s history.

“I’ve handled and deposed and defended Ponzi schemers over the years,” Diaz told the Miami Herald. “Efrain Betancourt is the smoothest, cruelest and most arrogant, selfish and narcissistic of them all.”

Earlier this month, Betancourt gave a deposition in which he repeatedly invoked his Fifth Amendment right against self-incrimination while being questioned by Diaz. In a prior 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 told Diaz in a May 2021 deposition. “Now the payday portfolio has risks.”
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.

In reality, the complaint says, 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 is 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 Betancourt and his current wife, Leidy Badillo, the complaint says.

In court papers, EEB Capital’s lawyer, James Sallah, acknowledged that Betancourt and his current wife, Badillo, were signatories on the company’s bank accounts but denied the SEC’s allegation that EEB received $1.5 million of Sky Group investors’ funds for “no apparent legitimate purpose.”

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, according to her lawyer, Diaz, who also represents Zorrilla and others who sued her ex-husband.

In addition to the SEC complaint, there are at least a half-dozen lawsuits and arbitration cases filed against Betancourt and Sky Group.

Among the plaintiffs: Victor Segura and his daughter, Johanna Segura, who lost $200,000 after investing in his alleged loan scheme. They saw themselves as “investors,” not “lenders,” as Betancourt has tried to portray them and others in his defense. But the Seguras’ lawyers, Gerardo Vazquez and Steven Herzberg, counter that Betancourt has merely construed their investments as promissory notes to make them look like loans, not securities.

According to the Seguras’ federal lawsuit, “Sky Group and Betancourt used substantial investor funds for purposes other than the cash advances [to Payday loan borrowers], including paying for operating expenses and compensation to Sky Group’s executives ... along with payment of commissions to its unregistered advisors, brokers and sales agents.”
SEC alleges fraud

SEC officials accused Betancourt of lying to his payday loan investors.

Their complaint alleges that Betancourt and Sky Group misled investors by promising extraordinary returns on their promissory notes and representing that the payday loan business was profitable, even though Sky Group did not generate enough revenues to cover principal and interest payments due to investors. Betancourt was able to circumvent Florida’s caps on usury rates by making the payday loans through Utah, which allows far higher loan terms, until his business model collapsed.

“The scheme unraveled in July 2019, when Betancourt told investors that Sky Group was suspending investor repayments on the notes,” according to the SEC complaint filed in Miami federal court. “Even then, Betancourt and Sky Group continued to lie, falsely blaming the suspension of repayments on a vendor responsible for processing the company’s investor repayments.”

“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.

The SEC is seeking permanent injunctions against and financial penalties from the defendants.