InfoBytes Blog
Payday lender to pay $39 million in alleged misappropriated funds suit
On June 29, the U.S. District Court for the District of South Florida granted final judgment against a Florida-based payday loan company and an individual (collectively, “defendants”), resolving SEC allegations that the company fraudulently misappropriated funds from investors. According to the complaint, the SEC claimed that the defendants falsely represented to many Venezuelan-American investors that the company would use their funds to finance payday loans through the offer and sale of “safe and secured” promissory notes. However, the complaint noted that “the proceeds [the company] generated from its consumer loan business were woefully insufficient to cover principal and interest payments to investors,” and had been offered in violation of registration and anti-fraud provisions of the Securities Act and Exchange Act. The complaint also noted that the individual allegedly misappropriated $2.9 million for personal use and authorized the transfer of $3.6 million to friends and relatives for no apparent legitimate business purpose. According to the order, the company: (i) is permanently restrained and enjoined from violating sections of the Securities Act and Exchange Act; (ii) must pay $30.3 million in disgorgement; and (iii) must pay $2 million interest on disgorgement and a $7 million civil penalty. The individual is jointly liable for more than $4.6 million in disgorgement.