TLDR
- The SEC has filed fraud charges against NovaTech and its promoters, alleging a $650 million crypto pyramid scheme.
- NovaTech allegedly targeted over 200,000 investors worldwide, particularly Haitian-American communities.
- The company’s founders, Cynthia and Eddy Petion, are accused of using religious overtones to attract investors.
- NovaTech promised 2-3% weekly returns but allegedly operated as a Ponzi scheme.
- The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties.
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against NovaTech, a cryptocurrency company, and its promoters, alleging they orchestrated a $650 million pyramid scheme that defrauded over 200,000 investors worldwide.
The case, filed in Miami federal court, marks another significant action in the SEC’s ongoing efforts to regulate the cryptocurrency industry and protect investors from fraud.
NovaTech, founded in 2019 by married couple Cynthia and Eddy Petion, is accused of operating a multi-level marketing (MLM) scheme that promised investors high returns from cryptocurrency and foreign exchange trading. According to the SEC’s complaint, the company claimed to offer 2-3% weekly returns and assured investors they would be “in profit from day one.”
The SEC alleges that NovaTech and its promoters targeted specific affinity groups, particularly Haitian-American communities, using religious overtones to gain trust. Cynthia Petion, who branded herself as the “Reverend CEO,” claimed that God had sent her a “vision” to start the company.
The scheme allegedly operated through social media, Telegram, and WhatsApp groups, often communicating in Haitian Creole to appeal to their target audience.
However, the SEC contends that only a small fraction of investors’ money was actually invested in trading activities. Instead, the majority of funds were allegedly used to pay earlier investors in a classic Ponzi scheme structure and to cover commissions for promoters. The Petions are also accused of siphoning millions of dollars for personal use.
The scheme began to unravel in October 2022 when investors experienced significant delays in withdrawing their funds. By May 2023, NovaTech had shut down its website, leaving remaining investors unable to access their money.
In addition to NovaTech and the Petions, the SEC has named six promoters as defendants in the case: Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley. These individuals are accused of continuing to recruit investors despite numerous red flags, including delayed withdrawals and regulatory actions in the U.S. and Canada.
Eric Werner, director of the SEC’s Fort Worth regional office, stated, “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.”
The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties against the defendants. One promoter, Martin Zizi, has already agreed to a partial settlement, including a $100,000 civil penalty, without admitting or denying the charges.
This case follows a similar lawsuit filed in June by New York Attorney General Letitia James against NovaTech and its founders, estimating the fraud at more than $1 billion. Both regulators have characterized the operation as a pyramid scheme.
The NovaTech case is part of a broader crackdown by the SEC on legally dubious cryptocurrency ventures.
In recent years, the agency has taken action against various crypto-related entities, including Ripple, BitClout, and Uniswap Labs. Gurbir Grewal, director of the SEC’s division of enforcement, recently stated that the agency has taken over 100 crypto-related actions in the past decade.
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