SEC Charges NovaTech Over $650M Crypto Fraud, Alleging Ponzi Scheme

Highlights:

• SEC charges NovaTech with operating a $650 million Ponzi scheme, defrauding over 200,000 investors.
• Promoters and founders are accused of using investor funds to pay earlier investors and for personal gain.
• The legal action seeks permanent injunctive relief, disgorgement, and civil penalties against NovaTech and its leaders.

The U.S. Securities and Exchange Commission (SEC) has charged NovaTech Ltd. and its leaders, Cynthia and Eddy Petion, with orchestrating a massive $650 million cryptocurrency scam that has affected more than 200,000 investors globally. The regulatory action underscores the growing scrutiny within the cryptocurrency market as authorities work to protect investors from fraudulent schemes.

SEC Alleges Multi-Level Marketing Scheme

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, accuses NovaTech of operating a deceptive multi-level marketing (MLM) and crypto investment scheme from 2019 to 2023. 

Cynthia and Eddy Petion founded NovaTech and allegedly lured investors with false promises. They claimed high returns from cryptocurrency and foreign exchange trading. The Petions reportedly did not invest the funds as promised. Instead, they used most of the investor money to pay existing investors and promoters. Only a small fraction of the funds were used for actual trading.

The SEC also alleges that the Petions drained millions of dollars from the scheme for their personal benefit. Many investors, including a significant number from the Haitian-American community, were unable to withdraw their funds when the scheme collapsed in May 2023. This led to substantial financial losses for the affected investors.

Promoters Charged for Expanding the Scheme

The SEC did not stop with the Petions. The regulatory body also charged several top promoters, including Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley, for their roles in promoting NovaTech to unsuspecting investors. These individuals allegedly played a critical role in expanding the scam by recruiting more investors, even after becoming aware of certain regulatory actions taken against NovaTech.

The SEC’s complaint highlights how these promoters continued to downplay the risks associated with NovaTech, focusing instead on the potential for high returns. Despite regulatory warnings, they kept recruiting investors, exacerbating the impact of the Ponzi scheme.

Legal Action and Consequences

The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties against NovaTech, the Petions, and the other defendants. The complaint aims to hold those responsible for the scam accountable for their actions. It also seeks to provide some justice for the victims.

In a partial settlement, one of the promoters, Martin Zizi, agreed to a $100,000 civil penalty and a permanent injunction against future violations. The settlement, however, is subject to court approval, and other monetary remedies will be determined at a later date.

This isn’t the first time NovaTech has faced legal challenges. In June 2024, New York Attorney General Letitia James filed a lawsuit against the Petions and NovaTech. She alleged that they defrauded thousands of investors, mainly from the Haitian-American community, through a similar Ponzi scheme.

The SEC’s pursuit of justice in the NovaTech case strongly warns other operators of fraudulent schemes. It highlights the increasing regulatory scrutiny in the cryptocurrency market as authorities work to safeguard investors against scams.