The recent announcement by the U.S. Securities and Exchange Commission (SEC) has shed light on a massive crypto fraud scheme orchestrated by Cynthia and Eddy Petion, the masterminds behind NovaTech Ltd. This fraudulent scheme targeted over 200,000 investors worldwide, primarily members of the Haitian-American community, and raised more than $650 million in crypto assets under false pretenses of offering lucrative returns on investments.
Operating NovaTech Ltd. as a multi-level marketing (MLM) and crypto asset investment program, the Petions deceived investors with promises of high returns through investments in crypto assets and foreign exchange markets. Despite guaranteeing secure investments and prompt profits, the Petions used the majority of the funds collected from new investors to pay returns to earlier investors, a classic Ponzi scheme tactic. Only a small portion of the funds were actually utilized for trading, while millions of dollars were diverted for personal use by the Petions, resulting in significant financial losses for investors as the scheme collapsed.
Aside from the Petions, several top promoters played crucial roles in perpetuating the fraud by recruiting new investors into the scheme. Despite regulatory actions by authorities in the U.S. and Canada, the promoters continued to lure in new investors, thereby expanding the reach of the fraud. The SEC has taken legal action against NovaTech, the Petions, and the promoters, charging them with violations of federal securities laws and seeking injunctions, disgorgement of ill-gotten gains, and civil penalties.
In a significant development, one of the key promoters, Martin Zizi, has agreed to a partial settlement with the SEC, agreeing to pay a civil penalty of $100,000 and be permanently enjoined from future violations. The SEC’s investigation into NovaTech was complex and required collaboration with external agencies, showcasing the extensive effort to bring the perpetrators to justice.
This case serves as a stark reminder of the risks associated with unregulated and fraudulent investment schemes in the crypto asset realm. The SEC’s swift and decisive actions underscore its commitment to protecting investors and holding accountable those responsible for financial fraud. As Eric Werner, Director of the SEC’s Fort Worth Regional Office, emphasized, schemes like NovaTech cause significant losses to victims worldwide, and both the architects and promoters will be held accountable.
The ongoing legal proceedings against NovaTech and its promoters aim to recover funds for defrauded investors and send a strong message to those who engage in fraudulent schemes. The SEC’s efforts to combat financial fraud in the crypto space demonstrate the agency’s dedication to safeguarding investors and maintaining integrity in the financial markets.