$650 Million Crypto Fraud Scheme Uncovered by SEC
The U.S. Securities and Exchange Commission (SEC) has taken significant legal action against NovaTech Ltd., a cryptocurrency company, and its founders, Cynthia and Eddy Petion, alleging their involvement in a massive $650 million fraudulent scheme that targeted over 200,000 investors globally. This extensive operation, which reportedly spanned from 2019 until NovaTech’s collapse in May 2023, has sent shockwaves through the digital asset community, particularly among the Haitian-American population, which was heavily targeted by the scheme.
According to the SEC’s complaint filed in the Southern District of Florida, NovaTech and its founders operated a multi-level marketing (MLM) scheme disguised as a legitimate crypto asset and foreign exchange investment program. The Petions are accused of falsely promising investors that their funds would be secure and profitable, with Cynthia Petion even branding herself as “Reverend CEO” and claiming that NovaTech was “God’s vision.”
However, rather than investing the funds as promised, the SEC alleges that the Petions used new investor money primarily to pay off earlier investors and to distribute commissions to promoters. Additionally, the complaint highlights that a substantial portion of the funds was diverted for the personal use of the Petions, leaving most investors with significant financial losses when the scheme ultimately collapsed.
The SEC’s investigation also led to charges against six NovaTech promoters: Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley. These individuals are accused of aggressively recruiting new investors into the scheme, despite clear “red flags” such as delayed withdrawals and prior regulatory warnings that questioned NovaTech’s legitimacy. In one of the first settlements, Martin Zizi agreed to pay a $100,000 civil penalty and consented to a permanent injunction against future violations, though this crypto fraud settlement is still pending court approval.
Read More at SEC Press Release
Legal Actions and Industry Implications
This case is not the first legal challenge faced by NovaTech and the Petions. Two months prior to the SEC’s lawsuit, New York Attorney General Letitia James filed a separate lawsuit in Manhattan’s state court, alleging that the fraud could exceed $1 billion. Both lawsuits aim to secure restitution for the victims and impose civil penalties on the defendants.
The NovaTech crypto fraud scandal has highlighted the ongoing risks within the rapidly evolving cryptocurrency space. As the industry continues to expand, large-scale frauds such as this are expected to draw increased scrutiny from regulators and industry watchdogs. The implications of the NovaTech case will likely be a key topic of discussion at upcoming industry events, where experts will explore the challenges of regulating digital assets and protecting investors in an increasingly complex market.
As the legal proceedings against NovaTech unfold, the case serves as a stark reminder of the potential dangers in the cryptocurrency sector, emphasizing the need for rigorous due diligence and caution among investors.
Crypto fraud case information: SEC v Nova Tech Ltd, U.S. District Court, Southern District of Florida, No. 24-23058.
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