SEC Sues NovaTech For Alleged $650 Million Crypto Fraud

According to TechCrunch, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against crypto startup NovaTech, accusing the company of fraudulently raising over $650 million from more than 200,000 investors, many of whom are part of the Haitian-American community. NovaTech, founded in 2019 by Cynthia and Eddy Petion, is described by the SEC as a multi-level marketing (MLM) scheme that misled investors by claiming to invest in profitable crypto and foreign exchange markets. The SEC alleges that only a small portion of the funds was actually used for trading, with the majority being allocated to payments for existing investors and commissions for promoters. The Petions are also accused of siphoning millions of dollars for personal use. When the company collapsed, many investors were unable to withdraw their funds, having been recruited by promoters who downplayed the risks associated with NovaTech. Eric Werner, director of the SEC’s Fort Worth regional office, stated that the scheme caused significant losses to tens of thousands of victims globally. He emphasized that the SEC will hold not only the principal architects but also the promoters accountable for their roles in the fraud. The SEC's lawsuit names NovaTech promoters Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley as defendants. The agency is seeking permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties. Zizi has already agreed to a partial settlement. Seth Goertz, a partner at law firm Dorsey & Whitney and former assistant U.S. attorney, described the case as a textbook affinity group Ponzi scheme, noting the significant scale and impact of the fraud. He also highlighted the role of cryptocurrency in facilitating such schemes due to its perceived potential for high returns. This lawsuit is part of the SEC’s ongoing efforts to crack down on legally dubious crypto ventures. In 2020, the SEC sued Ripple for allegedly raising over $1.3 billion through an unregistered security offering. More recently, the SEC charged BitClout founder Nader Al-Naji with fraud and has been investigating VCs involved with decentralized crypto exchange operator Uniswap Labs. Gurbir Grewal, director of the SEC’s division of enforcement, stated in a recent address that the agency has taken over 100 crypto-related actions in the past decade. Topics © 2024 Yahoo.