The post SEC Charges NovaTech in $650 Million Crypto Fraud Affecting Over 200K Investors Globally appeared first on Coinpedia Fintech News
The Securities and Exchange Commission (SEC) has announced significant charges against NovaTech Ltd. and its principals, Cynthia and Eddy Petion, for executing a massive $650 million cryptocurrency fraud scheme that impacted over 200,000 investors globally. Many of the affected are from the Haitian-American community. Additional charges were levied against key promoters who accelerated the scam’s reach, making this one of the most expensive frauds.
Couple Operated a Pyramid Scheme
According to the U.S. Securities and Exchange Commission, a couple who founded NovaTech Ltd. reportedly ran a pyramid scheme that raised over $650 million in cryptocurrency.
From 2019 to 2023, the Petions utilized NovaTech as a vehicle for a multi-level marketing (MLM) scheme masked as a legitimate investment in crypto assets and foreign exchange. They promised investors immediate profits and security of their capital, creating a facade of a risk-free investment.
However, the operation primarily redirected new investors’ funds to pay earlier investors and hefty commissions to the promoters, with only a minimal portion actually invested as claimed.
According to the SEC, the Petions also diverted millions from the scheme for personal use. The collapse of NovaTech left many unable to withdraw their funds, resulting in massive financial losses for the majority of the investors.
On Monday, the regulator charged NovaTech founders Cynthia and Eddy Petion, along with their company and promoters Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley for their involvement in promoting NovaTech to investors. According to the SEC, the scheme impacted over 200,000 investors worldwide, including many from the Haitian-American community.
The SEC said, “Certain Defendants targeted affinity groups, in particular the Haitian-American community, and used religious overtones and appeals to financial freedom and independence to solicit investors.”
NovaTech Continued Scamming Despite Legal Warnings
The promoters played crucial roles in expanding the scheme’s reach. Despite encountering regulatory warnings and actions against NovaTech by U.S. and Canadian authorities, they continued to recruit new investors, actively downplaying the risks involved.
The SEC’s complaint includes charges of fraud and registration violations against all involved parties. It seeks permanent injunctions, the return of ill-gotten gains, and civil penalties. As part of a preliminary settlement, Martin Zizi has agreed to a $100,000 civil penalty and a permanent injunction, although other financial penalties will be determined later.
The SEC added, “NovaTech and the Petions caused untold losses to tens of thousands of victims around the world. As we allege, MLM schemes of this size require promoters to fuel them, and today’s action demonstrates that we will hold accountable not just the principal architects of these massive schemes, but also promoters who spread their fraud by unlawfully soliciting victims.”
In June, New York Attorney General Letitia James filed a lawsuit against Cynthia Petion, her husband Eddy Petion, and others, accusing them of defrauding thousands of investors. According to the SEC, NovaTech collapsed in May 2023, leaving most investors unable to withdraw their funds.