SEC Files Fraud Charges Against Promoters of NovaTech, Alleged $650M Crypto Pyramid Scheme

The US SEC has filed a lawsuit against a crypto pyramid scheme and its operators, which the regulator says stole $650 million from 200,000 investors worldwide.

NovaTech has largely tapped into affinity groups, including Haitian-American church congregations, through WhatsApp groups and promotional events.

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit on Monday against an alleged crypto pyramid scheme, NovaTech, and eight of its promoters, accusing them of fraud and multiple violations of federal securities laws.

The SEC alleged in its filing that NovaTech defrauded investors of about $650 million over a four-year period. The lawsuit comes two months after New York Attorney General Letitia James filed a lawsuit against NovaTech, its founders and another pyramid scheme with alleged ties to NovaTech.

Read more: NYAG Sues 2 Crypto Pyramid Schemes and Promoters for $1 Billion Fraud on Haitian Americans

According to the SEC complaint, NovaTech and its backers targeted specific interest groups, mostly Haitian Creole-speaking church congregations living in the U.S. and abroad, through WhatsApp groups and promotional events, and persuaded more than 200,000 investors from around the world to pay a total of $650 million between June 2019 and May 2023, when the scheme collapsed.

The company’s founders, American married couple Cynthia and Eddy Petion, now believed to be living in Panama, and backers including Martin Zizi, James Corbett, Corrie Sampson, Dapilinu Dunbar, John Garofano and Marsha Hadley, all named as defendants in the SEC’s lawsuit, used “religious overtones” when encouraging investors. Cynthia Petion called herself the “Priest CEO” in NovaTech promotional materials and on her social media profiles and claimed that God sent her a “vision” to start the company while she was brushing her teeth.

Potential investors in NovaTech believed that their investments would be pooled and traded on crypto and foreign exchange markets. According to the SEC, NovaTech’s marketing materials promised investors 2-3% weekly returns and it allegedly never reported a weekly trading loss.

But only a small portion of investors’ money was actually invested, according to the SEC, and the money that was invested suffered “significant trading losses.” Instead, the Petitioners and their employees allegedly operated a Ponzi scheme to pay previous investors using new investors’ money. They also allegedly funneled millions of dollars in investor funds to themselves.

The scheme began to unravel in October 2022, when investors began experiencing significant delays trying to withdraw their money from the site. Shortly after the withdrawal issues began, several state securities regulators in the U.S. and Canada issued cease-and-desist orders against NovaTech. By May 2023, the petitioners had shut down NovaTech and taken its website offline, preventing remaining investors from withdrawing their money.

The story continues

The SEC’s complaint alleges that NovaTech and the Petitioners violated the anti-fraud and securities registration provisions of the federal securities laws. Various promoter defendants are accused of violating the anti-fraud, securities registration, and brokerage registration provisions of the federal securities laws.

The SEC is seeking permanent injunctive relief, restitution, pre-judgment interest, and civil penalties.

One of the defendants, Martin Zizi, has already accepted a partial plea deal. Without admitting or denying the charges against him, Zizi agreed to pay a $100,000 fine and be permanently banned from future securities violations. The partial plea deal still needs to be approved by a judge.