SEC charges NovaTech over $650m crypto fraud

The U.S. Securities and Exchange Commission has accused an unknown cryptocurrency trading company of defrauding 200,000 investors worldwide.

Continuing its fight against cryptocurrency fraud, the SEC has charged NovaTech, its executives, and affiliated promoters with a multi-layered marketing fraud scheme that generated $650 million worth of digital assets.

The complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Cynthia and Eddy Petion orchestrated a four-year crypto investment scam through NovaTech. Operating between 2019 and 2023, the Petions promised investors profits from day one and guaranteed the safety of their capital.

According to the SEC, the duo recruited a group of backers including Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley to help run the fraud scheme. NovaTech then allegedly stole millions of dollars worth of investor cryptocurrencies and eventually blocked the withdrawals.

“As we allege, MLM schemes of this size require promoters to support them, and today’s action demonstrates that we will hold accountable not only the principal architects of these massive schemes, but also the promoters who illegally deceive victims and spread their scams,” Eric Werner, director of the SEC’s Fort Worth Regional Office, said in a statement on Aug. 12.

Does the SEC have a hand in crypto scams?

This was the second U.S. watchdog to sue NovaTech for crypto fraud. In June, New York Attorney General Letitia James also accused the trading firm and its principals of being the masterminds of a criminal operation.

Reacting to the news, Consensys attorney Bill Hughes questioned whether the issue could have been avoided if there were clear rules and crypto service providers were allowed to register based on merit.

Industry voices have often criticized securities regulators for their “regulation by enforcement” approach to digital assets, with officials like Chairman Gary Gensler arguing that most cryptocurrencies are subject to federal securities laws.

Cryptocurrency stakeholders disagree on this issue, and it has triggered various legal battles, including lawsuits against Coinbase and Ripple.

Yes, of course the New York attorney general sued the Novatech founders, and the Justice Department should probably charge them if the allegations are to be believed, but this is the kind of case that no one can credibly complain about the SEC’s lawsuit.

The important question: How many of these cases are not followed up…

— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) August 12, 2024