The Securities and Exchange Commission announced charges on Monday against a payday loan company based in Miami, and its CEO for a securities fraud scheme that raised at least $66 million through the sale of promissory notes to more than 500 retail investors, including members of the South Florida Venezuelan-American community.
According to the SEC’s complaint, filed in the United States District Court for the Southern District of Florida, investors were told their money would be used by the company to make small-dollar short-term loans to consumers with poor credit or no credit and for costs associated with the loans. Instead, the defendant misappropriated at least $2.9 million for his 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 $3.6 million to friends and family “for no apparent business purpose.”
The defendant also allegedly used at least $19.2 million of investors’ money to make Ponzi-like payments to other investors. The SEC’s complaint alleges that the defendant misled investors by promising annual returns as high as 120% and representing that his business was profitable, even though the business did not generate sufficient revenue to cover principal and interest payments due to investors.
The SEC’s complaint charges the defendant with violations of the registration and antifraud provisions of the federal securities laws and acting as an unregistered broker. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties from the defendant; and disgorgement with prejudgment interest from the relief defendants, including the defendant’s ex-wife. The SEC names as individuals as relief defendants if they are believed to have obtained ill-gotten gains but are not accused of wrongdoing.