SEC Charges NovaTech Founders in $650M Cryptocurrency Fraud Scheme

The U.S. Securities and Exchange Commission (SEC) has taken decisive legal action against cryptocurrency firm NovaTech, along with its co-founders, Cynthia and Eddy Petion, alleging that they orchestrated a massive fraud scheme. According to the SEC, the Petions attracted over 200,000 investors globally, many from the Haitian-American community, amassing more than $650 million through false promises of guaranteed profits.

NovaTech, under the leadership of the Petions, purportedly enticed investors with assurances of safety and immediate profitability, with Cynthia Petion famously stating that investors would be "in profit from day one." However, the SEC contends that the reality was far different. Instead of safeguarding the invested funds, the Petions allegedly operated a classic Ponzi scheme, using the influx of new investments to repay earlier investors and reward promoters, while diverting substantial sums for their personal enrichment. This scheme persisted for four years until NovaTech's eventual collapse in May 2023.

The lawsuit filed in Miami federal court on Monday follows a similar legal move by New York Attorney General Letitia James, who, two months prior, filed a case against NovaTech and the Petions in Manhattan's state court. Her lawsuit claims that the fraud exceeded $1 billion in scope.

The SEC's complaint also highlights NovaTech's attempts to exploit the religious faith of its victims, using social media platforms, Telegram, WhatsApp, and even Haitian Creole to reach out to potential investors. Cynthia Petion positioned herself as a "Reverend CEO," portraying NovaTech as "God's vision" to gain trust and credibility.

Authorities have labeled the operation a pyramid scheme, wherein companies rely on continuous recruitment to maintain the flow of funds. The SEC's charges extend beyond the Petions to include six NovaTech promoters who allegedly ignored glaring signs of fraud, such as delayed withdrawals and regulatory actions in the U.S. and Canada. Among these promoters, Martin Zizi has agreed to a $100,000 civil fine, although his attorney has yet to comment on the matter.

Both the SEC and the New York Attorney General's office are seeking restitution for the victims and civil penalties against the perpetrators.

The case, filed in the U.S. District Court for the Southern District of Florida, is listed as SEC v. Nova Tech Ltd, No. 24-23058.