SEC confirms charging the NovaTech founders months after the New York Attorney General’s office initiated similar action.
The US Securities and Exchange Commission (SEC) confirmed that it had filed charges against NovaTech and its principals, alleging involvement in a Ponzi scheme that generated $650 million in crypto.
The securities watchdog accuses Cynthia and Eddy Petion of orchestrating the scam dubbed crypto asset investment program. According to the SEC, the duo ran the multi-level marketing (MLM) entity, primarily targeting the Haitian-American community in 2019-23.
SEC Charges NovaTech Founders for Defrauding Haitian-American Victims
SEC director at the Fort Worth regional office Eric Werner disclosed that NovaTech and the Petions orchestrated untold losses to unsuspecting tens of thousands of Haitian-American victims.
Werner added that the SEC alleges that MLM schemes of such size leverage promoters to fuel the agenda. The regulator’s action illustrates that the SEC is devoted to holding the principal architects behind the massive schemes accountable. It also illustrates the pursuit of promoters spreading fraud via unlawful solicitation of victims.
NovaTech was featured in the corridors of justice in mid-this year when New York Attorney General (NYAG) Letitia James sued the crypto exchange alongside AWS mining for running an illegal pyramid scheme. The AG indicated that the scammers realized $1 billion from unsuspecting investors, including 11,000 New York residents.
NovaTech and AWS Mining targeted immigrant and religious communities, promising financial freedom. Instead, the defendants stole the investors’ money and drained the life savings of the victims, James disclosed at the time.
The SEC complaint alleges that NovaTech and its promoters promised investors profits and fund safety. They claimed to invest the funds pooled from the investors into the crypto and foreign exchange markets. Unfortunately, Cynthia and Eddy Petion ran a Ponzi scheme, allocating most of the funds to settle existing investors and promoters while siphoning some for their use.
The SEC disclosed in the Monday statement that when NovaTech ultimately imploded, the majority of investors were unable to withdraw their investments. This development left most writhing in substantial losses.
Although the New York AG accused NovaTech of stealing hundreds of millions in crypto, the new complaint by Gary Gensler-led SEC hardly specifies the cryptocurrency type stolen during the scam.
SEC Pursues NovaTech Crypto Scheme Promoters
The recent complaint by the SEC captures charges against promoters of NovaTech. The defendants’ list includes Martin Zizi, John Garofano, James Corbett, Dapilinu Dunbar, Corrie Sampson, and Marsha Hadley. The agency accuses the promoters of aiding the recruitment of investors towards the scheme.
The SEC indicates that the promoters earn substantial commissions for the investors and networks recruited.
The complaint indicates that Zizi, Corbett, Sampson, and Dunbar learned of the red flags about NovaTech. Despite the awareness of regulatory actions by the US and Canadian regulators, the promoters downplayed the red flags and sustained their recruitment campaigns.
The SEC noted that Zizi consented to settle $100,000 civil penalty in partial plead to the charges. Such awaits the court’s approval, though Zizi will be banned from participating in similar activities.
The agency disclosed that Zizi, however, has yet to admit or deny the SEC’s allegations, noting that it will determine the subsequent penalties at a later date.
Promoters of the Crypto Ponzi Scheme
Beyond the US, Australian regulators have recently pursued promoters of crypto fraud, as in the case of an Aussie behind a scheme that fleeced investors over $3.5 billion. While the Australian man escaped jail time, Judge Robert Newlinds, in his ruling, placed John Bigatton on a three-year good behavior bond.
The New South Wales resident was sentenced mid-last month after pleading guilty to offering financial services without a license. The charges related to Bigatton’s role in prompting BitConnect – an open-source crypto platform – as its national representative in the 2017-18.
The prosecutors indicated that Bigatton was featured in several seminars and had two social media posts that extolled the apparent potential of BitConnect as a high-yield investment program.
The regulator confirmed that the BitConnect system proved a classic Ponzi scheme, with the money pooled from the new investors allocated towards settling earlier participants. Although released after paying $100 as security, Bigatton should comply with the excellent behavior until mid-July 2027. Whether the SEC will borrow a leaf from the Australian regulators when resolving the NovaTech crypto scheme is uncertain.
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