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USA: SEC sues payday lender over allegations of intra-community fraud

BIScom Subsection: 
Editorial Staff

The USA's Securities and Investment Commission has issued proceedings against Sky Group USA LLC, a payday loan company based in Miami, and its CEO, Efrain Betancourt, Jr. alleging fraud in the issue of some USD66 million of promissory notes, primarily within the Venezuelan community in what the SEC calls "affinity fraud" but which we have for several decades referred to as "intra-community fraud."

Intra-community fraud relies on the idea that people trust others from a similar background or with similar interests.

In this case, it is alleged, Betancourt targeted those from a Venezuelan background.

In a media release, the SEC says "According to the SEC's complaint, filed in the United States District Court for the Southern District of Florida, Sky Group and Betancourt falsely told investors that Sky Group would use investors' money solely to make payday loans and cover the costs of such loans, when, in reality, Betancourt misappropriated at least USD2.9 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 – and transferred at least another USD3.6 million to friends and family, including his ex-wife, Angelica Betancourt, and to EEB Capital Group LLC, an entity whose bank accounts Betancourt and his current wife control. Sky Group and Betancourt also allegedly used at least USD19.2 million of investors' money to make Ponzi-like payments to other investors. Finally, the SEC's complaint alleges that Sky Group and Betancourt misled investors by promising annual returns as high as 120% and representing that Sky Group's business was profitable, even though Sky Group did not generate sufficient revenue to cover principal and interest payments due to investors."

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