SEC Sues Alleged Crypto Pyramid Scheme NovaTech for $650 Million Fraud

The U.S. Securities and Exchange Commission (SEC) has taken legal action against NovaTech, a cryptocurrency investment platform, and eight of its promoters, accusing them of running a fraudulent pyramid scheme that defrauded investors out of approximately $650 million over four years. The lawsuit, filed on Monday, alleges multiple violations of federal securities laws and follows a similar lawsuit filed by New York Attorney General Letitia James just two months ago.

According to the SEC’s complaint, NovaTech preyed on vulnerable affinity groups, particularly Haitian Creole-speaking churchgoers in the United States and abroad. Using a combination of WhatsApp groups and promotional events, the company allegedly convinced over 200,000 investors to entrust their funds to the scheme between June 2019 and May 2023, when the operation ultimately collapsed.

NovaTech’s founders, Cynthia and Eddy Petion, an American married couple now believed to be residing in Panama, were at the helm of this elaborate scam. The SEC’s filing details how the Petions and their network of promoters—Martin Zizi, James Corbett, Corrie Sampson, Dapilinu Dunbar, John Garofano, and Marsha Hadley—used religious messaging to lure investors. Cynthia Petion, who referred to herself as the “Reverend CEO,” claimed in promotional materials and on social media that God had given her a “vision” to start the company while brushing her teeth.

Investors were led to believe that their money would be pooled and invested in cryptocurrency and foreign exchange markets, with promises of weekly returns of 2-3%. NovaTech’s marketing materials further claimed that the company had never posted a weekly trading loss.

However, the SEC’s investigation reveals a starkly different reality. The complaint states that only a small portion of the investors’ funds was ever invested, and the investments that were made incurred “significant trading losses.” Instead, the Petions and their employees allegedly operated a Ponzi scheme, using funds from new investors to pay returns to earlier investors, all while siphoning off millions for their personal use.

By October 2022, the scheme began to unravel as investors faced significant delays in withdrawing their funds. As withdrawal requests piled up, several state securities regulators in the U.S. and Canada issued cease-and-desist orders against NovaTech. By May 2023, the Petions had shut down the company and taken its website offline, leaving thousands of investors unable to recover their money.

The SEC’s lawsuit charges NovaTech and the Petions with violating anti-fraud and securities-registration provisions of federal securities laws. The promoters are similarly accused of violating antifraud, securities-registration, and broker-registration provisions. The SEC is seeking permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties against all defendants.

One of the defendants, Martin Zizi, has already agreed to a partial settlement with the SEC. Without admitting or denying the charges, Zizi has agreed to pay a $100,000 civil penalty and will be permanently barred from future securities violations. This partial settlement is pending approval by a judge.

Digital Assets Desk